Weekly US Petroleum and NG Supply Reports 2009

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

Quote:

I've now read several comments on various blogs saying that the plan for this year is to import gasoline from Europe as needed

This would not be terribly surprising.... If you are BP, for example, with your newest and most efficient refineries over in Europe, you want to run them at the highest utilization possible, and shut the ancient Amoco plant in Illinois all the way down if that is what it takes.

I have not heard in a long time what is happening at the giant plant down in Texas City, but they put several billion dollars in capital investment into that place, in order to keep it from blowing up every time they try to run it. Maybe they will get that back at some point....

It's still probably more efficient for these guys to produce unleaded than the likes of Valero and Tesoro.... If you were a pesky analyst working for BP right now, knowing what you know about what it costs you to pump North Sea crude out of one of your company platforms, refine it over there someplace, and ship the gas to the US (with the tanker rates near zero) compared to Valero's ability to buy oil on the open market, and refine it into something in one of their dilapidated old plants in Louisiana, you might know exactly how much of an economic advantage you have, and how much longer Valero will keep some of those old places running, particularly in light of the fact that some of them needed some investment to keep running as well.

Valero's report came out the other day, and they lost $3B in the last quarter. That won't go on for long.

http://finance.yahoo.com/q/is?s=vlo

memmel · **Joined:** Wed Oct 31, 2007 12:00 am **Posts:** 209

pup55 wrote:

Quote:

I've now read several comments on various blogs saying that the plan for this year is to import gasoline from Europe as needed

This would not be terribly surprising.... If you are BP, for example, with your newest and most efficient refineries over in Europe, you want to run them at the highest utilization possible, and shut the ancient Amoco plant in Illinois all the way down if that is what it takes.

I have not heard in a long time what is happening at the giant plant down in Texas City, but they put several billion dollars in capital investment into that place, in order to keep it from blowing up every time they try to run it. Maybe they will get that back at some point....

It's still probably more efficient for these guys to produce unleaded than the likes of Valero and Tesoro.... If you were a pesky analyst working for BP right now, knowing what you know about what it costs you to pump North Sea crude out of one of your company platforms, refine it over there someplace, and ship the gas to the US (with the tanker rates near zero) compared to Valero's ability to buy oil on the open market, and refine it into something in one of their dilapidated old plants in Louisiana, you might know exactly how much of an economic advantage you have, and how much longer Valero will keep some of those old places running, particularly in light of the fact that some of them needed some investment to keep running as well.

Valero's report came out the other day, and they lost $3B in the last quarter. That won't go on for long.

http://finance.yahoo.com/q/is?s=vlo

Yep agree 100% and I stand by my statement I made a while back that the US is toast the day these import that mysteriously show up fail to show one day.
I really wish European inventory numbers where easier to come by. Not having them makes the real situation opaque.
However I did find this.
http://www.bloomberg.com/apps/news?pid=20601085&sid=agYIn6ziPOGM

So maybe the magic gasoline imports are not going to show up this year ?

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

Quote:

Crude Oil 50.62
HO 1.4340
RBOB 1.5047
Gap -0.0707
Ref Margin 10.8848 $/bbl
Ref Margin 0.2592 Cents/Gal

We have not done this calculation in awhile... At $11 per barrel, refining margin, Valero and Tesoro are doing a bit better. I think we figured that they break even in the region of $9...

Quote:

Profits for refiners turning a barrel of crude into fuels averaged $4.60 between April 1 and April 8, about half that of the second quarter 2008, according to data on BP’s Web site.

If you think about $4.60 being the "profit margin", that means that their refining cost is probably somewhere between $5 and $6, as long as the gross margin, which we calculated above, is somewhere in the range of $10-$11 like it is today. We already know that Tesoro and Valero break even at about $8-$9, so you can see what an advantage BP has if they are able to refine their products at a $2-$3 cost advantage compared to their competitors....

As to the import flood: If they can produce fuel for $5 in Europe, ship it to the US for a couple of cents, and then sell it at $11 for a $6 margin, that is what they will do. They will even do this if they can only sell it for 8, which is below the operating costs for Valero. I suppose we could get good at this.... and develop a little model by which we can estimate the imports based on the domestic US refining margin....

AirlinePilot · **Posted:** Fri Apr 17, 2009 9:12 pm

I think we all get what your cornucopian delerium is driving at Oily, the fact is that we are in the largest global economic crisis in modern times and I'd expect that we see a reduction in demand and that little spike of increased supply at the end of the chart.

Would you not also agree that the general trend/average has been one of shrinking days supply over the longer term? Its right there in the chart, you can see it visually. If things were BAU right now I highly doubt that data would look anything like it does. This is a short term anomaly to the trend. The second we get any inkling of the global crisis bottoming that supply uptick will be wiped out within months.

But you go on picking out the anomalies to the trends. In the longer run your going to see how that cornucopian fantasy land works out.

memmel · **Joined:** Wed Oct 31, 2007 12:00 am **Posts:** 209

Quote:

As to the import flood: If they can produce fuel for $5 in Europe, ship it to the US for a couple of cents, and then sell it at $11 for a $6 margin, that is what they will do. They will even do this if they can only sell it for 8, which is below the operating costs for Valero. I suppose we could get good at this.... and develop a little model by which we can estimate the imports based on the domestic US refining margin....

Pup55 I think this is true. I think however the plan is to get the overall gasoline inventories down over the next few months it makes it safer to fire up the refineries in Europe.

Now is far as Valero goes I really suspect that Valero is going to get squeezed and not get the refining margins they need off the open market because oil price will go up. BP should do even better. So given what your saying I think that after a initial squeeze just to get gasoline inventories in general down and firm up support BP will crank up the European refineries this year. This will help support oil prices putting Valero in a even tighter position.

So probably this is not yet the year that gasoline imports fail to show.

My big picture view is this seems to be the year that independent refiners get squeezed out of the market would could even see Valero bankrupt or close to it or another independent refiner.

Regardless of how oil moves either for peak oil reasons or economic reasons we probably now have a significant overcapacity in refineries and someone is going to lose. For the independents it seems the only way to do this is to squeeze down the refining margin. Plenty of ways this can happen.
It will be interesting to watch. But a short squeeze to draw down overall inventories then a strong increase in imported gasoline from Europe with strong oil prices seems to me the best way to takeout Valero. Initially Valero will see good refining margins and crank up gasoline production and more importantly pull down their own crude inventories.

Then its hammer time

BP fires up forcing oil prices higher and imports of gasoline from Europe higher and Valero is toast. I can't see BP pulling this off without rising oil prices. I

If we have falling oil prices its interesting because we still have all this excess capacity but I can't see how you can squeeze out the independents in a falling oil price market. I can't see a easy way for the independents to get squeezed out and in general it seems everyone would face low margins but nothing deadly. Regardless the refinery business seems set for a shakeout so someone is probably not going to make it. The question is who dies and how.
Maybe just simple closure of some of the excess capacity nothing dramatic and its individual refineries taken offline.

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

Quote:

Maybe just simple closure of some of the excess capacity nothing dramatic and its individual refineries taken offline.

Yeah, this is actually the most likely scenario--- the least competitive units in the least competitive plants get mothballed, or in the worst case, run until they drop and are not repaired... there is no dramatic bankruptcy or anything else, and the excess capacity gets weeded out in the same way it was added, which is incrementally, via attrition.

I am picking on Valero because they are just a poster child for that part of the industry, but it is much more likely that any of the couple of dozen smaller independent refiners end up walking away from the business first.

Valero's strategy, as we all remember, was to buy a few of the inefficient, cat and dog plants from Conoco and others, borrow a lot of money to refurb them to give them a little better throughput, and enter the business with the minimum capital. We are now thinking that this strategy did not work out too well for them for several reasons.

If things go on in some fashion that approaches normal, the unleaded usage will pick up by the end of May and by June and July we will be using about an extra million barrels per day. The easy solution is to just run the way they are all summer, and the natural seasonality will draw the inventory down by about 30 million barrels, putting them at about 200 or 210 by the end of summer. So it would not terribly surprise me to see the current low refinery usage continue until further notice.

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

Quote:

Prediction
Unleaded Prediction 17-Apr
Beginning Inv mbbl 216.5
Imports Wk/Day 6.65 0.95
Production Wk/Day 62.3 8.9
Available 285.45
Balance Wk/Day 70.4 10.05
Ending Inv Mbbl 215.10
Prod Supplied 9
Predicted Change -1.4

Distillates Prediction 17-Apr
Beginning Inv mbbl 139.6
Imports Wk/Day 1.4 0.2
Production Wk/Day 28 4
Available 169
Balance Wk/Day 28.0 4
Ending Inv Mbbl 141.0
Prod Supplied 4.1
Predicted Change 1.4

Crude Oil Prediction 17-Apr
Beginning Inventory 366.7
Domestic Prod 38.15 5.45
Imports 63 9
SPR+/Supply- -1.75 -0.25
Total Available 466.1
Provided to Refineries 98.7 14.1
Ending Inventory 367.4
Predicted Change 0.7
Refinery Utilization 80.500

I think this week we will have a bit of fun. The difference beetween me and someone who does this for a living is that if I am wrong, there are no consequences other than a good laugh. Therefore, we will put into our forecast this week a couple of theories, and if they work out, we are good, and if not, nothing bad will happen.

The first one is the precipitous drop in refinery utilization that we noticed last week. I, an old SPC guy, know that when a system is running in a stable fashion and then you get a strange piece of data, there is a computable probability that the system changed, rather than some random piece of data coming through. Starting the first week in February, the refinery utilization averaged 82.04% with a standard deviation of .54, Last week, it dropped to 80.4%, which is a 3-standard deviation difference from what it had been running. The probability of this happening randomly is less than 1%. So, we are going to assume for the time being that this somebody flipped a switch, and trend of even lower refinery utilization is going to continue. I put in 80.5% as the new "norm" for refinery utilization, and then back-worked to the unleaded and distillate production.

Secondly, is the issue of crude oil imports. We had the theory, which temporarily we will call the 'Padre Island" theory, which is that if the crude oil price is under 50, the owners of all of those tankers will send the captains to Padre to participate in the 'Girls Gone Wild' booth at Spring Break, rather than to the LOOP to have them unload crude. The imports blipped up during the short period of time that the price was above 52, so we will make the guess that imports will be much lower this week, in light of the lower prices. Maybe we will be off by a week or two, we will have to see.

Unleaded demand about 10, distillate demand 4, so we should have a drain in unleaded and a bit of a build in distillates. The small build in crude oil will be less than what would have occurred if we had not been filling the SPR.....

So if we are right, we will show up the analysts a bit, and if we are wrong, well, like I said, nothing bad will happen....

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

Quote:

Crude oil stockpiles probably rose by 2.5 million barrels in the week ended April 17 from 366.7 million the previous week, the highest since September 1990, according to a Bloomberg survey before today’s Energy Department report

Quote:

Yesterday, the industry-funded American Petroleum Institute reported that inventories declined 1.01 million barrels to 370.2 million last week, the first drop since March 6.

Quote:

The Energy Department will probably show that gasoline stockpiles dropped 700,000 barrels from 216.5 million the prior week, according to the Bloomberg survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably fell by 1 million barrels from 139.6 million barrels

http://www.bloomberg.com/apps/news?pid=20601116&sid=a2d6vu5ybzvI&refer=africa

I am ready to declare "forecasting brilliance" if the Padre Island theory is proved correct, as suggested by the API report.

This is why I love Wednesdays.

I will have to wait until later to claim it, because AP will be flying me out of Ohio when the report is issued at 10:30.

OilFinder2 · **Posted:** Wed Apr 22, 2009 9:06 am

Crude: +3.7 million barrels
Gasoline: +800K barrels
Distillates: +2.7 million barrels

At 370.6 million barrels crude stockpiles, we're starting to get near the all-time highs in the 380-390 million barrel range last seen in the summer of 1990.

http://tonto.eia.doe.gov/dnav/pet/hist/wcestus1w.htm

gnm · **Posted:** Wed Apr 22, 2009 9:36 am

OilFinder2 wrote:

At 370.6 million barrels crude stockpiles, we're starting to get near the all-time highs in the 380-390 million barrel range last seen in the summer of 1990.

http://tonto.eia.doe.gov/dnav/pet/hist/wcestus1w.htm

And this corresponds with economic recovery "just on the horizon" how?

-G :badgrin:

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

Quote:

Unleaded 17-Apr
Beginning Inv 216.5
Imports 7.7 1.1
Production 63.7 9.1
Available 287.9
Ending Inv 217.30
Balance 70.6
Balance/day 10.09
Prod Supplied 9.1
Actual Change 0.8
Deviation from Forecast 2.2

Distillates 17-Apr
Beginning Inv 139.6
Imports 1.344 0.192
Production 28.7 4.1
Available 169.644
Ending Inv 142.3
Balance 27.344
Balance/day 3.91
Prod Supplied 3.7
Actual Change 2.7
Deviation from Forecast 1.3

Crude Oil 17-Apr
Beginning Inv 366.7
Production 38.36 5.48
Imports 69.3 9.9
SPR+/Supply- -0.218
Total Available 474.36
Provided to Ref 101.5 14.50 83.4
Ending Inventory 370.6
Actual Change 3.9
Deviation from Forecast 3.2

pup55 Experts Actual
Crude Oil 0.7 2.5 3.9
Unleaded -1.40 -0.70 0.8
Distillates 1.4 -1 2.7

Quote:

Summary of Weekly Petroleum Data for the Week Ending April 17, 2009

U.S. crude oil refinery inputs averaged about 14.5 million barrels per day
during the week ending April 17, up 529 thousand barrels per day from the
previous week's average. Refineries operated at 83.4 percent of their
operable capacity last week. Gasoline production increased last week,
averaging 9.1 million barrels per day. Distillate fuel production
increased last week, averaging about 4.1 million barrels per day.

U.S. crude oil imports averaged nearly 9.9 million barrels per day last
week, up 464 thousand barrels per day from the previous week. Over the
last four weeks, crude oil imports have averaged 9.5 million barrels
per day, 234 thousand barrels per day below the same four-week period
last year. Total motor gasoline imports (including both finished gasoline
and gasoline blending components) last week averaged about 1.1 million
barrels per day. Distillate fuel imports averaged 192 thousand barrels
per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) increased by 3.9 million barrels from the previous
week. At 370.6 million barrels, U.S. crude oil inventories are above
the upper boundary of the average range for this time of year. Total
motor gasoline inventories increased by 0.8 million barrels last week,
and are above the upper boundary of the average range. Finished gasoline
inventories fell last week while gasoline blending components inventories
increased during this same time. Distillate fuel inventories increased by
2.7 million barrels, and are above the upper boundary of the average range
for this time of year. Propane/propylene inventories increased by 0.6 million
barrels last week and are above the upper limit of the average range. Total
commercial petroleum inventories increased by 11.3 million barrels last week,
and are above the upper limit of the average range for this time of year.

Total products supplied over the last four-week period has averaged 18.5
million barrels per day, down by 6.5 percent compared to the similar period
last year. Over the last four weeks, motor gasoline demand has averaged 9.1
million barrels per day, down by 0.4 percent from the same period last year.
Distillate fuel demand has averaged about 3.7 million barrels per day over the
last four weeks, down by 9.4 percent from the same period last year. Jet fuel
demand is 9.3 percent lower over the last four weeks compared to the same
four-week period last year.

Well, it looks as though we will have our laugh, rather than our claim of brilliance. The frequent viewers of this thread well know that the importation of an addition .9 mbpd/6.3 million barrels for the week has offset the SPR additions and the higher refinery inputs that we saw this week, and continued the inventory build, which by now has reached the historical level, on its way toward the biblical level.

The refinery utilization is also up this week versus last, and I guess the 1% chance of screwed up data last week came true, since it was back up over 83% this week. What we did get about right was the unleaded and distillate demand. As a result of the refinery utilization being off, our calcuation for unleaded production was also off. Maybe what actually happened was that the data was off two weeks ago, and it averaged out this week. That will be my theory for the next forecast.

Anyway, the sea captains and the refinery operators were both diligently at work this week instead of goofing off, and all I can do is smile at that prospect.

note that the domestic production has levelled out at around 5.48 mbpd.

So, we did not get the better of the analysts, but we had some fun, and will try again next week.

OilFinder2 · **Posted:** Wed Apr 22, 2009 11:41 am

gnm wrote:

OilFinder2 wrote:

At 370.6 million barrels crude stockpiles, we're starting to get near the all-time highs in the 380-390 million barrel range last seen in the summer of 1990.

http://tonto.eia.doe.gov/dnav/pet/hist/wcestus1w.htm

And this corresponds with economic recovery "just on the horizon" how?

-G :badgrin:

The last time we had a crude stockpile this big in 1990, was followed in the 90's by the longest postwar expansion ever! :-D

oilluber · **Joined:** Sun Jul 03, 2005 12:00 am **Posts:** 489

OilFinder2 wrote:

gnm wrote:

OilFinder2 wrote:

At 370.6 million barrels crude stockpiles, we're starting to get near the all-time highs in the 380-390 million barrel range last seen in the summer of 1990.

http://tonto.eia.doe.gov/dnav/pet/hist/wcestus1w.htm

And this corresponds with economic recovery "just on the horizon" how?

-G :badgrin:

The last time we had a crude stockpile this big in 1990, was followed in the 90's by the longest postwar expansion ever! :-D

you are assumming all other factors being equal, which I highly doubt.
The only expansion I see is the expansion of USD

TheDude · **Posted:** Sun Apr 26, 2009 10:57 am

OilFinder2 wrote:

-G

The last time we had a crude stockpile this big in 1990, was followed in the 90's by the longest postwar expansion ever! :-D

By that logic we should see a maniacal fascist take control of a major country soon. Or Japan invade Manchuria.

Memmel - interesting piece on tanker rates bottoming out: Ship Chartering: VLCC rates at 11-year lows, scrap now says Frontline

Quote:

Singapore: With VLCC rates at their lowest in at least 11 years owners will scrap ships and cancel orders for new ones, according to Frontline Ltd., the world’s largest VLCC operator. VLCCs are making $4,335 a day after fuel costs for delivering Middle East crude to Asia and the U.S., according to data from the London-based Baltic Exchange. Hamilton, Bermuda- based Frontline said February 26 it needs $12,000 to cover costs such as repairs, crew, insurance and lubricants for engines. Interest on loans takes the figure to $32,100. “We will see scrapping happening soon, then we will see massive cancellations in the order book,” Singapore-based Jens Martin Jensen, temporary chief executive officer of Frontline’s management unit, told Bloomberg. “I don’t think this market is going to last until 2011.”

FRO's not in such great shape, either.

This will tighten seaborn inventories/throughput, chimerical or otherwise.

memmel · **Joined:** Wed Oct 31, 2007 12:00 am **Posts:** 209

TheDude wrote:

Memmel - interesting piece on tanker rates bottoming out: Ship Chartering: VLCC rates at 11-year lows, scrap now says Frontline

I think we are starting to reach the point where we find out if these tankers are not needed because we don't have any oil to fill them with or if we really are swimming in oil and don't need the tankers. It looks like its reached a case of the glass is either empty or full.

Given the empty tankers I go with the empty glass assumption. I find it tough to believe we managed to flood the oil with oil without having to use oil tankers. Unless of course many of our stored barrels only exist on paper.

Weekly US Petroleum and NG Supply Reports 2009

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