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Weekly US oil data
Constructive again
We think this morning’s DoE weekly oil report was constructive because it effectively
affirmed the two bullish mini-trends introduced last week:
One, US crude oil balances are tightening in a seasonal way, though faster than
normal: Crude oil imports are trending lower. Crude oil inventory is falling very fast
– especially on the US Gulf Coast, where refinery runs remain quite high.
Two, the US downstream is firming up as well. Stocks of refined products are still
falling, albeit only marginally, despite high refiner output. The key here is sharply
higher total product demand.
Upside oil price risk
In the very near term, oil markets appear to be in a hurry to set new two-year price
records before 2010 is history. In thin trading, markets are edging up on apparent
gasoline issues in the US northeast; physical crude oil tightness across Europe and
Asia on sentiment and in sympathy with equity and a few other commodity markets.
There is a risk of a pull-back in prices once trading picks up early in January. But on
balance we think price risk is well to the upside of our forecast US$83 per barrel
Brent. Markets have not yet accounted for another year of above trend demand
growth, and the relatively low priced back-end of crude oil futures curves seem at
odds with increasingly clear visibility on looming scarcity.
Top three numbers in today’s weekly US oil data
Crude oil inventories fell another 5.3mbls, on low imports and high runs.
Total oil products inventories still did not rise. These stocks fell marginally,
thanks mostly to the ‘other product’ category, but this is now a directly reported
number. Downstream inventory is now down for the 13th week in a row.
Demand growth accelerates above 4% – four week MA, y/y.
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