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Weekly US oil data
Seasonally weak, but will it worsen?
The DoE weekly oil report was again quite bearish. Crude inventories grew,
products‟ stocks dropped only modestly, and demand retreated in nearly all
categories. With refinery runs at low levels, we would expect a more significant
product draw. Imports remain a key number to watch; levels (4wk MA) need to
remain stable. We view any material increase as a downside risk for prices. (As a
comparison, current run levels are 2% higher than in 2010, while imports are up 5%).
January is historically the seasonally-weakest period in the fundamentals complex.
Demand is never particularly strong, and stocks tend to build higher. For the
moment, we remain in line with seasonal trends, but this could change in either
direction very quickly. If fundamentals were to weaken further, it would call into
question our demand growth forecast for +1.9%y/y growth in January.
Brent – WTI Differential
Trading at a +$10/b premium to WTI, Brent has received a great deal of
attention lately. Fundamental issues with WTI are the primary cause for the
divergence. Oversupply of crude in the mid-continent combined with very limited
demand (essentially limited to the number of refineries in the region, which are
also entering maintenance season) is causing crude to pile up in an environment
where storage is very near to capacity. Therefore, the marginal barrel of supply
can only be sold at a deep discount. The situation has the potential to worsen,
as issues in Canada have taken supply offline. We forecast that WTI remains in
bad shape through March/April, until demand for gasoline returns and the region
faces a shortage. Until then, the differential can grow wider still.
Top three numbers in today’s weekly US oil data
Crude oil inventories grew by +4.8 mbls, imports increased modestly and
refinery runs fell again. Stocks at Cushing, OK increased by +0.9mbls w/w.
Total oil products inventories grew for the 2nd time in 3 weeks. These stocks
increased by +2.4mbls, though levels would have been much higher had it not
been for yet another large draw (-4.2mbls) from the „other product‟ category.
Demand growth decelerated to 1.6% (four week MA, y/y), and the single week
numbers show signs of further weakness.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Weekly US oil data
Seasonally weak, but will it worsen?
The DoE weekly oil report was again quite bearish. Crude inventories grew,
products‟ stocks dropped only modestly, and demand retreated in nearly all
categories. With refinery runs at low levels, we would expect a more significant
product draw. Imports remain a key number to watch; levels (4wk MA) need to
remain stable. We view any material increase as a downside risk for prices. (As a
comparison, current run levels are 2% higher than in 2010, while imports are up 5%).
January is historically the seasonally-weakest period in the fundamentals complex.
Demand is never particularly strong, and stocks tend to build higher. For the
moment, we remain in line with seasonal trends, but this could change in either
direction very quickly. If fundamentals were to weaken further, it would call into
question our demand growth forecast for +1.9%y/y growth in January.
Brent – WTI Differential
Trading at a +$10/b premium to WTI, Brent has received a great deal of
attention lately. Fundamental issues with WTI are the primary cause for the
divergence. Oversupply of crude in the mid-continent combined with very limited
demand (essentially limited to the number of refineries in the region, which are
also entering maintenance season) is causing crude to pile up in an environment
where storage is very near to capacity. Therefore, the marginal barrel of supply
can only be sold at a deep discount. The situation has the potential to worsen,
as issues in Canada have taken supply offline. We forecast that WTI remains in
bad shape through March/April, until demand for gasoline returns and the region
faces a shortage. Until then, the differential can grow wider still.
Top three numbers in today’s weekly US oil data
Crude oil inventories grew by +4.8 mbls, imports increased modestly and
refinery runs fell again. Stocks at Cushing, OK increased by +0.9mbls w/w.
Total oil products inventories grew for the 2nd time in 3 weeks. These stocks
increased by +2.4mbls, though levels would have been much higher had it not
been for yet another large draw (-4.2mbls) from the „other product‟ category.
Demand growth decelerated to 1.6% (four week MA, y/y), and the single week
numbers show signs of further weakness.
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