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Page added on August 18, 2017

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The Oil Glut Rewrites History

Consumption

The good news for oil bulls is that U.S. stockpiles of the stuff, while still bloated, are now firmly back inside the historical range. The bad news is that all that bloating means the average isn’t what it was.

When the Energy Information Administration puts out its weekly summary of oil inventories, the one-pager usually has some form of wording about how the current level compares with what’s typical for the particular time of year. Here’s an example from this week’s report, released Wednesday:

At 466.5 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year.

U.S. inventories being in the upper half of the range means OPEC’s efforts to clear the glut still have a ways to go. On the bright side, stockpiles have now dropped for seven weeks in a row, draining almost 43 million barrels from the tanks — so things have been heading in the right direction. But even here, OPEC isn’t making as much headway in its journey back to “rebalancing” the market as it may seem.

That’s because those historical ranges are five-year averages that roll forward with time. So in the summer of 2017, there’s about two years worth of build-up skewing the range higher. To see what I mean, I calculated average ranges for the periods 2012 through 2016 and 2010 through 2014, with the second corresponding to the period before inventories blew out and oil prices crashed. The chart below shows how weekly commercial crude oil inventory levels in 2017 compare with the recent historical range and the pre-crash one:

You can see immediately how the sudden build-up of oil in 2015 and 2016 have expanded the historical range enormously. Notice, too, how the average level for the most recent five-year period is roughly 20 million to 40 million barrels above the ceiling for the slightly older range. Inventories would need to drop by another 127 million barrels to be inside that green area.

Here’s the same chart for gasoline:

The ranges for gasoline are much tighter, possibly due in part to the fact that, unlike crude oil, exports of the product have been allowed for many years. Even here, though, while stocks are now inside the upper part of the five-year range, they’re still almost 8 million barrels above the top end of the older range.

What Moving Averages Do

Move

One should also acknowledge, however, that inventories are only one part of the equation. After all, demand for oil changes over time. So higher (or lower) stockpiles may reflect the need to cover more or less consumption, not just excesses or deficits.

With that in mind, here’s how U.S. crude oil and gasoline inventories compare with trailing demand:

The Daily Show
Relative to trailing demand, gasoline inventories are already back to where they were before the crash but crude stocks still have a ways to go
Source: Energy Information Administration, Bloomberg Gadfly analysis
Note: U.S. inventories as a multiple of average daily demand for gasoline and petroleum products, trailing 12 months. Data for June and July 2017 interpolated from the EIA’s weekly estimates.

There’s some good news here for the likes of OPEC, with U.S. gasoline inventories getting back to the sort of demand-adjusted levels that prevailed in that halcyon summer of 2014 (although last week’s increase in inventories, unusual for this time of year, is troubling). Not so the crude glut. Even after the reductions, it remains high however you cut it.

Inventories may be back inside the range. But the lesson here is to read historical averages as living, moving things rather than fossilized remains.

bloomberg



36 Comments on "The Oil Glut Rewrites History"

  1. Dredd on Fri, 18th Aug 2017 8:58 am 

    “The Oil Glut Rewrites History”

    Not really, unless of course one is a sycophant of Oil-Qaeda’s history department (Beware of the Sycophant Epidemic – 2).

  2. bobinget on Fri, 18th Aug 2017 10:18 am 

    At this moment there exists a 4.00 gap between
    WTI and Brent.
    Translated:
    Buy US crude @46.91 sell elsewhere for $51.

    Would YOU prefer to sell a million barrels in the US or Europe? (a single tanker load)

    OK, it’s now $4.12 difference

    Bottom line, there is exactly one tanker off loading
    in GOM.

    Until we get lines forming for gasoline this ‘glut’ fiction will keep fooling.

    Prediction: In two weeks crude will be BELOW average storage.
    In four weeks WTI will be over $60.

  3. bobinget on Fri, 18th Aug 2017 10:29 am 

    Just in. US gasoline demand at 10 year high.
    Consumption for last week alone up a million barrels from previous. 3% higher YOY.

    Short term: in my state Oregon, a million people are expected to drive here to watch the eclipse.

    I’m going out on a limb now. Five hundred thousand
    cars are going to need return fill-ups.

    Say 24 gallons consumed R.T.

  4. bobinget on Fri, 18th Aug 2017 10:58 am 

    Nigeria and Venezuela are reported to be importing (light) crude.

    Excessive crude imports to the US may be ending as demand and prices improve.

    This coming Wednesday’s storage report will mark the tenth draw week in a row. How much longer can WTI be held in check?

    Be aware, without substantial Venezuelan imports
    it will be impossible to continue a ‘glut’ fiction.
    Either Venezuela has no exportable crude or she will ship to Europe for higher prices.
    Brent JUST jumped $2. as did WTI.
    See how powerful this web site!

  5. rockman on Fri, 18th Aug 2017 11:23 am 

    “The ranges for gasoline are much tighter, possibly due in part to the fact that, unlike crude oil, exports of the product have been allowed for many years.” And again the same BS about the alleged oil export ban which never existed. In fact, until recently, the US had been exporting more oil then all refinery products combined.

    Articles like this love to give the inventory volumes in GROSS terms instead of NET inventories. And what are net inventories? If you read the post closely you get a hint. It references inventories being above historical averages. And what are those historical averages? They are the WORKING INVENTORIES. It should be obvious but many don’t think about it: oil doesn’t come out of a well and magically and instantly appears as gasoline in your car’s fuel tank. It first goes down pipelines (a portion of the inventory number) to TEMPORARY storage facilities like Cushing, OK,(another portion of the inventory number) where it is typically blended to suit the refineries’ requirements. From there it it pumped down pipelines (another portion of the inventory number) to the TEMPORARY storage tanks at the refineries (another portion of the inventory number) before it is processed.

    So what is the net inventory: gross inventory (the number this article hypes) – the working inventory (the historical average). Obvious the NET inventory is much less the the number tossed out here.

    Then there’s the implication that all the NET inventory is oil for which the producers, like the Rockman and ExxonMobil, were unable to find buyers. In reality nearly all the oil inventory held by the producers is WORKING inventory. IOW why would the Rockman and XOM produce oil and pay someone to transport and store it when it would be logical to not produce in the first place? The increased amount of oil that has gone into the GROSS inventory number is oil that has been bought from the producers: in 41 years not once has the Rockman or XOM been unable to sell every bbl of oil we chose to produce. We might have chosen from time to time to not sell every bbl we were able to produce in response to low prices. But guess what: that volume IS NOT counted as part of the GROSS inventory.

    Two reasons why the GROSS inventory has increased. First, increased oil production means more WORKING inventory as more oil moves from the well head to the refineries. Second is the physical oil speculators (oil which they BOUGHT from producers) at a lower price hoping to sell at a higher price down the road. And the lower oil prices go the greater the potential incentive to BUY and store more oil.

    Which is why reducing production by OPEC has not DIRECTLY reduced inventories. If/when oil prices get high enough the speculators will start dumping oil. But dump enough and prices fall leading to holding on to stored oil longer. In fact when prices drop low enough the speculators send more oil to storage. Which again acts as a buffer to higher oil prices persisting very long.

    IOW the near record global oil production isn’t as much the cause for PERSISTENT low oil prices as the oil storage BUFFER held by the speculators. That oil can be added (or withdrawn) from the market place much quicker the producers. And interesting some of the biggest users of that price buffer may be some OPEC countries, like Iran. Difficult to get trustworthy numbers but Iran might be dumping inventory when prices get up just a few $’s. And despite claims denying it Russia and the KSA may also be doing it from time to time.

  6. bobinget on Fri, 18th Aug 2017 12:08 pm 

    Venezuela simply can’t (or won’t) contribute
    it’s ‘normal ration’ to US oil markets.
    The big question remains, will China or Russia prevail? I’m guessing, both. China needs every unit of crude Venezuela can produce.. below $50.

    Russia needs $100 oil. Venezuela needs $200 oil.
    Between China, Russia, and Venezuela, US can, from this day on, forgetaboutit.

    Only Davy admits to reading my stuff. So, let’s review.
    Venezuela’s only money making export is oil.
    Except for Russians all foreign (oil) workers are gone. Production is at an all time low.
    Venezuela is indebted to China and Russia for over
    140 Billion. China demands 250,000 B p/d as loans
    service. Venezuela just borrowed, yesterday, another two billion from ??? so as not to default.

    At this point, all Russia has to do is prevent ANY Venezuelan crude from reaching US markets.
    Wah-la! WTI goes into squeeze mode.
    Don’t believe? http://www.livecharts.co.uk/MarketCharts/crude.php
    Check out $4.00 arb between Brent and WTI

    off topic:
    My personal rumor concerns the 25th Amendment.
    All eyes/ears on Camp David.
    Don’t think most Republicans wish to see GOP
    go down porcelain parkway.

  7. Boat on Fri, 18th Aug 2017 2:02 pm 

    Bob,

    Don’t forget to add India to countries that are owed by Venezuela.

    When WTI is cheaper Canada wins.

    Did you know fracked oil sells well in Nigeria, Venezuela and because of Middle East politics now Qatar.

    “Prediction: In two weeks crude will be BELOW average storage.
    In four weeks WTI will be over $60”

    I bet under $50. Well check on Sept 3rd.

  8. Boat on Fri, 18th Aug 2017 4:09 pm 

    Bob.

    US oil production peaked at 9.67 mbpd. Current production is now 9.5. I predict record production by the end of Nov. 10 mbpd by Jan maybe even Dec.
    To shale detractors, you missed the boat again.

  9. GregT on Fri, 18th Aug 2017 6:15 pm 

    Boat,

    The U.S. CONSUMES closer to 20 Mbpd. That would be what Bob is talking about. Your usual nonsense above, in no way counter’s Bob’s point.

  10. GregT on Fri, 18th Aug 2017 6:20 pm 

    And Boat,

    $60 a barrel oil would actually be better for shale producers, but still not quite good enough.

  11. Boat on Fri, 18th Aug 2017 6:42 pm 

    greggiet,

    The US imports a net 4.5-5 mbpd, down from 12 mbpd thanks to fracking.

    Fracking has added over 100,000 bpd over the last 6 months. No need for $60. Why? frackers can’t keep up with drillers now. 150 wells added to DUCT inventory last month.
    Sick with hate, you don’t follow oil. Neither does Bob

  12. Makati1 on Fri, 18th Aug 2017 6:57 pm 

    ‘The Oil Glut Rewrites History” Should read: “The US Rewrites History”

    “…many citizens await Monday’s spectacle of a total solar eclipse in parts of the country. They apparently don’t realize that another eclipse has been underway for months: the total eclipse of reality across the entire landscape of the USA. … Just as empires tend to build their most grandiose monuments prior to collapse, our tottering empire is concocting the most monumentally ludicrous delusions before it slides down the laundry chute of history.”

    http://www.zerohedge.com/news/2017-08-18/first-they-came-statues

    Madness roams the U$.

  13. rockman on Fri, 18th Aug 2017 10:19 pm 

    “The U.S. CONSUMES closer to 20 Mbpd.” No, the US utilizes about 20 mm bopd. It exports about 6.1 mm bbls of oil and refinery products. Thus it only CONSUMES about 14 mm bbls per day.

  14. rockman on Fri, 18th Aug 2017 10:37 pm 

    “Venezuela simply can’t (or won’t) contribute
    it’s ‘normal ration’ to US oil markets.” More specifically Vz as of last May was only exporting only 708,000 bopd to the US. The US is currently refining almost 20 mm bopd. Thus only 3.5% comes from Vz. Meanwhile in May the US imports from Canada represented 21%…about 6X as much from Vz.

    Seems like should be much greater focus on Canadian oil import stability then that of Venezuela.

  15. rockman on Fri, 18th Aug 2017 10:45 pm 

    “Why? frackers can’t keep up with drillers now. 150 wells added to DUCT inventory last month”. And frac crews never have been able to keep up: every shale well drilled automatically becomes a DUC while waiting on a frac crew: a few weeks to several months. The tricky part of developing a useful stat is distinguishing wells waiting the normal lag period and wells which the operator suspends frac’ng indefinitely for whatever their reason. That distinction has a huge impact on how one reads the dynamic.

  16. Boat on Fri, 18th Aug 2017 10:48 pm 

    greggiet will never get consumption, import, export, crude and production of US petroleum products. Why? He can’t follow or comprehend 2 reports.

    https://www.eia.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm

    https://www.eia.gov/petroleum/drilling/

    He has plenty of time to opinionate false numbers when 10 min of looking would give him the real numbers with history added.

  17. Anonymouse on Fri, 18th Aug 2017 10:56 pm 

    Boatietard, you are both illiterate and innumerate, as you proven on countless occasions. Retards should not be allowed to run around the inter webs trying to feebly lecture their betters(which in your case, is just about everyone), on things like ‘comprehension’. Stick to what you know best, namely where to source bulk ramen noodles at the best price, and…..thats pretty much about all you are good for, retard.

  18. Boat on Fri, 18th Aug 2017 11:38 pm 

    rock,

    “The tricky part of developing a useful stat is distinguishing wells waiting the normal lag period and wells which the operator suspends frac’ng indefinitely for whatever their reason. That distinction has a huge impact on how one reads the dynamic”.

    I agree with you, that distinction would be interesting. I do know that the Permian in Jan 2014 DUCTS were at 625 and now 1721. That is huge change representing a lot of money and production potential.

    Google …oil fracking crew count 2017 and you will find links on the shortage of fracking crews. Your the ff guy, you tell me if the information is wrong.

  19. Makati1 on Sat, 19th Aug 2017 12:27 am 

    Boat, “Real numbers” … from the EIA? LMAO

  20. dave thompson on Sat, 19th Aug 2017 1:12 am 

    Ok guys oil glut does not exist, repeat oil glut never did exist. Oil is pumped out of the ground refined and burned over time all oil is burned. If there is an example of a time where the price goes down because the oil is abundant, the market overloaded with oil, it all still gets burned one way or another.

  21. dave thompson on Sat, 19th Aug 2017 1:13 am 

    over time and on it goes.

  22. Davy on Sat, 19th Aug 2017 4:31 am 

    Someone is being stupid, makat the numbers are good enough ask Rock. It is the EIA predictions that are often suspect. If you would remove your emotional agenda you would have more facts in your life.

  23. forbin on Sat, 19th Aug 2017 5:44 am 

    sighs

    $50 is high , $10 boe can be considered a glut ….

    go figure

    Forbin

  24. rockman on Sat, 19th Aug 2017 9:53 am 

    Boat – “…and you will find links on the shortage of fracking crews”. And another tricky stat: how many frac crews are required to not have a “shortage”? Does that mean no operator has to wait on a frac crew when it’s ready for one? In that case there has always been a shortage. And not just frac crews. There is typically been a “shortage” of drill rigs and other oil field equipment: it’s not economical to build EXCESS equipment and have it sitting in a yard waiting for an operator to order it out. Hell, I’ve seen Deep Water operators wait 2+ years for a drill rig.

    The more meaningful stat is the wait time for a frac crew. During the height of the boom it was more then 6 months in some areas. No one was tracking it during the boom but there were thousands of DUC wells. Not because the operators wanted to delay frac’ng: they had no choice as they waited in line for an available frac crew.

    The truly interesting stat I’ve yet to see is how long has the period been between the end of drilling and the frac. Making that even more complicated: unless someone pulls the regulatory reports on each individual well the DUC period runs from the time drilling ended and production begins. It can take several months after a well is frac’d before it begins producing. Even worse: it can take several months after a well begins producing before that information becomes publicly available.

    For all the statements about DUC stats I’ve yet to see details of how those stats are generated. In Texas you report to the TRRC when you begin and finish drilling and when you begin producing. But not when you frac: you get the frac’ng permit and do it when you’re ready for it. To know the details you have to pull the records for each individual well: the TRRC does not generate this stat as far as I can tell.

  25. Boat on Sat, 19th Aug 2017 9:08 pm 

    Davy,

    The eia is the go to source for the world minus mak, imagine that. The eia itself comments that predictions are difficult. They also clean up their numbers over time as they get more data.

    Guys like mak claim a gov bias even though their predictions come in on the high side and low side. He is a weird dude.

  26. GregT on Sun, 20th Aug 2017 12:00 am 

    “Thus it only CONSUMES about 14 mm bbls per day”

    Sorry Rockman. Semantics. Those other 6 million barrels of oil each and everyday, are not consumed by the U.S., but the profits are. My bad.

  27. Boat on Sun, 20th Aug 2017 12:27 am 

    greggiet,

    The US taxes profits but investors from all over the world own refineries, pipelines, shipping etc.

  28. GregT on Sun, 20th Aug 2017 12:43 am 

    Boat,

    “The eia is the go to source for the world minus mak, imagine that.”

    Imagine that Kevin. Makati is the only person in the world who doesn’t trust government statistics? That’s crazy talk. You aren’t crazy Boat, or are you?

  29. GregT on Sun, 20th Aug 2017 12:53 am 

    “The US taxes profits but investors from all over the world own refineries, pipelines, shipping etc.”

    Thanks Boat, for that. Maybe you could be of some further assistance. Please define “The US”.

    Thanks.

  30. Boat on Sun, 20th Aug 2017 12:55 am 

    greggiet,

    I have followed the eia for years. I have looked at numbers from various other sources. So yes I think the eia government stats are great. In your little childish world that would be crazy talk. So yes, call me crazy but well informed.

  31. GregT on Sun, 20th Aug 2017 1:23 am 

    Good for you Boat. A self admitted ‘follower’,and a well informed one at that.

  32. Makati1 on Sun, 20th Aug 2017 2:33 am 

    Boat, What religious devotee does not believe their religious book? Does that make the book correct? The Koran? The Bible? The Torah? The Book of Mormon? Others? No, of course not. They are just manufactured idols to be worshiped by the weak and ignorant. Like the golden calf of the Old Testament.

    Likewise, EIA devotees want to believe because anything else would destroy their dreams and plans. The average non-thinking American serf doesn’t want to question the unemployment figures, the GDP numbers, the inflation numbers, etc. because the real numbers would destroy that “American Dream”. What the serfs are trying hard to ignore is the putrid odor that is emanating from the carcass of an already dead dream.

    Continue to worship at the idol of money, Boat. Believe. But don’t expect the consequences of the “American Dream” to miss you. Reality is a bitch.

  33. Davy on Sun, 20th Aug 2017 6:28 am 

    “The average non-thinking American serf doesn’t want to question the unemployment figures, the GDP numbers, the inflation numbers, etc. because the real numbers would destroy that “American Dream”

    Please makat, and your messaged versions are better? You are an extremist who hates massaged numbers but uses them as needed to support your brand of extremism. Asia is one big lie of numbers driven China. The EIA has good number you just have to wade through the BS. This is why we are here and have discussions. That does not mean you kill the messenger. No makat, you are one of those types who claims numbers are bad until you can use them in your own bad way then they are good numbers. You are no different than the propaganda you claim to hate. You cherry pick your facts for an alternative reality. You are an extremist of hate.

  34. Boat on Sun, 20th Aug 2017 7:42 am 

    mak,

    The average American doesn’t give a flip about gov numbers but they know the price of a gal of milk and what it takes to fill a tank of gas.
    Your idea that gov numbers some how make or break dreams is just wild crazy shyt. Charts and numbers give historical context but having a good job or no job has more to do the American dream.

  35. Boat on Sun, 20th Aug 2017 8:03 am 

    mak,

    Worship at the idol of money? lol For close to 35 years I have been dumping money into the stock market. I certainly could have bought a bunch of shyt instead. Hell I could have spent that money on prepping instead. If I never spend a dime or blow it all away at a casino or buy an island, saving money is just a life style choice, not something to worship.
    Seen the market? My financial choices are kicking ass.

  36. bobinget on Sun, 20th Aug 2017 2:54 pm 

    BENGHAZI, Libya (Reuters) – Libya’s Sharara oilfield, the country’s largest, has been shut down since Saturday because of a pipeline blockade, industry sources and an engineer said.

    State-owned National Oil Corporation (NOC) declared force majeure on loadings of Sharara crude from the Zawiya oil terminal on Sunday, a document seen by Reuters showed.

    Sharara had been producing up to 280,000 barrels per day (bpd) in recent weeks. The field has experienced several temporary shutdowns because of protests by armed groups and oil workers since it reopened last December after a two-year pipeline blockade.

    A Libyan oil source said the group blockading the pipeline since Saturday had also shut it in the past. The exact location of the blockade and the group’s demands were not clear, an industry source said.

    There was no immediate comment from NOC in Tripoli, which runs Sharara in a joint venture with oil companies Repsol, Total, OMV and Statoil.

    Sharara’s production is key to a revival in Libya’s oil output, which surged above 1 million bpd in late June, about four times higher than its level last summer.

    Production at Sharara dipped earlier in the month because of security breaches that NOC last week said had been resolved.

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