Macquarie Research: Weekly US oil data Not entirely bearish, though not strong

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Weekly US oil data
Not entirely bearish, though not strong
We think this morning‘s DoE weekly oil report erred on the bearish side, though
there were a few highlights. The biggest negative was obviously the turn in product
stocks, which had previously dropped for 15 consecutive weeks. Demand growth in
gasoline and diesel did not look particularly strong last week either. That said, it is
typical for nearly all stocks to build in January, so the number was not entirely
unexpected—it merely takes a gust of wind away from crude‘s fundamentals-driven
momentum higher. As for demand, the headline number remains constructive, with
annual growth continuing to come in north of 4%.

The biggest question on our minds is: how big will the 1Q stock build be?
On average, crude builds between 25mbls and 35mbls over the course of the
first quarter. However, this number has grown in recent years (Interestingly, the
increase in 2008 was even higher than that of 2009). Last year‘s increase of
27mbls—though not extreme—did little to help already-bloated inventory levels,
and crude stocks closed the year higher than they started. On the product side
(and we understand the seasonal trends for each product differ dramatically),
stocks typically drop by some -30mbls, though the range is much wider. In 2010,
products dropped by -34mbls in 1Q. We forecast accelerating product demand
through February and March, which should help put a dent in US stocks.
Top three numbers in today’s weekly US oil data
 Crude oil inventories fell another -2.2mbls, in spite of a jump in imports and
lower refinery runs. Stocks at Cushing, OK fell -0.1mbls w/w.
 Total oil products inventories ended their 15-week streak of drops. These
stocks increased +3.1mbls, and would have been higher if not for yet another
large draw (-5.2mbls) from the ‗other product‘ category.
 Demand growth decelerated to 4.1% (four week MA, y/y), but this remains an
extremely healthy rate, with total daily demand still oscillating around 20mb/d.