Weekly US Petroleum and NG Supply Reports 2007-08

[pup55]

To celebrate 100 pages, we should start a new thread.

To say farewell to the old thread, I would point out that the old thread got 124,600 views and 1512 replies, which is an average of over 84 views per reply. This is one of the most heavily viewed threads on PO.com.

Here is a new model run for you:



The "base case" in this model is weekly imports of 1.2 mbpd, which appears to be do-able based on the last two weeks, and gradual production ramp-up from the current 8.8 mbpd to 9.4 mbpd

The "9.2 maX" case is the same production ramp up (.1 mbpd per week for the next 5 weeks) but the maximum sustained production is 9.2 mbpd.

The "9.2/fast ramp up case" is an increase of .2 mbpd per week until production gets to 9.2 mbpd, and sustained at that level all summer.

So what we can see from this is: If imports stay at 1.2 mbpd, and sustained maximum production is 9.4, the inventory will stabilize, but 9.2 is not enough to get it to stabilize, so presumably 9.3 is the ragged edge. It will all come down to this question: how much fuel can the nation's refineries produce at full production. We will still have to wait and see.

All of the above models assume a demand increase of .2 mbpd over and above last year, which is pretty close to accurate.

[chuck6877]

There are more questions......

--What if Saudi has really peaked like has been proposed by Stuart Staniford at www.theoildrum.com ?

--What if the world is really past peak and the U.S. will not be able to get the oil necessary when the refineries start to run at full speed again?

When the refineries run at full speed the crude oil inventories may start to get drawn down very rapidly. This is when the world is going to demand Saudi Arabia increase production. If they can't we'll all know they're past peak.

If we are past peak, then there won't be enough oil to refine! This will mean gasoline inventories will continue to decline.

Chuck

[strider3700]

True but thats not the issue right now. We actually have a relative glut of oil at the moment because the refineries are not able to use it.

Long term declining oil production will cause shortages at the refineries currently we are facing a non geological bottleneck. My concern is what if we never make it to the point where a geological bottleneck affects us directly. What if refinery issues lead to economic problems and collapse. $5 or $6/gallon could be one horrible hurricane season away and I fail to see how the economy doesn't crumble under that.

[Etika]

Russia might've just thrown a wrench into the works with that 1.2 mbpd. Due to their recent diplomatic scuffle with Estonia, Russia has stopped fuel export through Estonia ( http://www.reuters.com/article/worldNew ... 6120070502 ). Quarter of Russia's refined exports are normally routed through Estonian ports to EU so this will have a large impact on refined oil products in Europe. Even though most of this export will probably be rerouted successfully this is a clear threat to EU that is backing Estonia. Unless this situation is cleared quickly there will a be sharp increase in price of refined oil products and attempt to increase stockpiles in case of additional supply reductions from Russia. In any case I suspect that this will have a clear impact on European export in few days.

[shortonoil]

pup55 said:

To celebrate 100 pages, we should start a new thread.

Congratulations on the success of your thread pup; it has been very successful because it is always very well thought out and informative. We all thank you.

I haven’t had time to run the numbers yet; just getting home from my personal war on ignorance (teaching mathematics part time), but looking at the recent history of the components in the above chart, seems to indicate a rather optimistic outlook toward hitting 9.4 mb. My knee jerk reaction is that it is not very probable; perhaps possible, but not likely. There are one hell of a lot of unknowns that could derail that 9.4 senario.

[DantesPeak]

The latest word from Antwerp is that the refinery strike will still go ahead (see my post on Europe thread). While it is unclear exactly how much this would affect gasoline exports to the US, since this comes soon after the French port strike it does not appear that Europe is capable of supplying the imports its did in May last year.

However pup55’s import guess (above) of 1.2 million barrels per day of gasoline imports may be as good as any – provided that US wholesale gasoline prices stay roughly around $2.40 or higher (about where they were Monday & Tuesday in New York City).

Thanks pup55 and shortonoil.

EIA says we are entering the great unknown:

Doug MacIntyre, an analyst at the EIA, said that inventories probably won't rise enough in the coming weeks to reach the lower end of their five-year average by Memorial Day, but he added that's not a cause for alarm.

"I don't want to get into what's adequate, what's not," Mr. MacIntyre said. "We could have adequate stocks with stocks below the lower end of the range. It just means you'll have higher prices."

The National Petroleum Council, an advisory committee to the U.S. Energy Secretary, used to estimate a "minimal operating inventory level" for gasoline, but the EIA stopped publishing it several years ago "because we didn't really know what the minimum operating inventory level was," Mr. MacIntyre said.

However, with imports running at 1.1 million barrels a day to 1.2 million barrels a day and refiners boosting production to 8.8 million barrels a day to 8.9 million barrels a day, "maybe we could start to see a build" and reach the bottom of the range in June when stocks typically draw down, he added.

WSJ
edit: added comments from EIA

[shortonoil]

WHOW! BAM! POW!

Take a look at this:
gasoline product produced - 57% last week. pup is this possible and is it sustainable?

It looks like the refineries just pulled a 2 ton bunny out of a hat.

Could this have anything to do with the rather low utilization we are seeing??

http://tonto.eia.doe.gov/dnav/pet/pet_s ... _nus_w.htm

[pup55]

Welcome, Etika.

Unless this situation is cleared quickly there will a be sharp increase in price of refined oil products and attempt to increase stockpiles in case of additional supply reductions from Russia

Presumably, if this and the Antwerp strike occur, it will take a few weeks for the effects to reach the US, because of the shipping delay. But, the calculations are clear: We need this level of imports to keep our inventory situation stable. These two episodes illustrate that a problem in one region can and will easily spread to other regions.

What if the world is really past peak and the U.S. will not be able to get the oil necessary when the refineries start to run at full speed again?

On this issue, the maximum capacity of US refineries is a little over 17.7 mbpd inputs. Currently we are running at about 15.1 mbpd inputs, so even at full production, that's about 2-2.5 mbpd additional crude oil demand, because we will probably not be able to get over 96% utilization right now.

If Saudi could not provide any more crude than it is right now, and neither could anybody else, we could still cover this for quite a while by drawing it out of inventory, at first out of the normal commercial inventory and then out of the SPR.

But, like keeping a bunch of gas cans in your garage, drawing from inventory can only be done once, after that, you have to take your chances with the market.

One of the reasons we started this thread two years ago is that we knew one of the first signs of a peak would be the consistent drawdown of inventory over an extended period, and if we could identify this condition when it happened, we might be able to sense when the peak is on us.

57% last week. pup is this possible and is it sustainable?

Yes to both. This is about where it normally runs. Back in the early 90's this number frequently got into the 62-65% range but the product mix has obviously changed gradually since then. It has been about 57% since right about the time Katrina hit. The all time maximum was 68% (December 98), but I doubt we will get that high any time soon with things set up like they now are.

Since 2001, on average, refinery utilization increased 0.46% per week during the month of may. If this year is true to form we should be looking at 92% overall utilization by the end of the month. So this is actually pretty consistent with the .1 mbpd model. This would put us at 9.153 mbpd (at 57% gasoline production) for unleaded by the end of the month. It remains to be seen how much higher we can or will go after that, however.

[newman1979]

With 740,000 b/d of gasoline being shut down in Antwerp starting today as reported by DantesPeak on another thread today, it seems unlikely that Europe will be in a position to continue exports of gasoline to the US at present levels through the month at current prices. Of course the strike doesn't start until May 9, but with inventories at their lowest level in decades for this time of year,193.1 m/b, the price of gasoline seems very low compared with the present risks to the supply of gasoline in the next two months.

[DantesPeak]

Russia might've just thrown a wrench into the works with that 1.2 mbpd. Due to their recent diplomatic scuffle with Estonia, Russia has stopped fuel export through Estonia ( http://www.reuters.com/article/worldNew ... 6120070502 ). Quarter of Russia's refined exports are normally routed through Estonian ports to EU so this will have a large impact on refined oil products in Europe. Even though most of this export will probably be rerouted successfully this is a clear threat to EU that is backing Estonia. Unless this situation is cleared quickly there will a be sharp increase in price of refined oil products and attempt to increase stockpiles in case of additional supply reductions from Russia. In any case I suspect that this will have a clear impact on European export in few days.

Welcome Etika.

This is a rather sudden move, and yes, will definitely complicate the European gasoline export situation even more.

Russia rail move to hit Estonia
By Stefan Wagstyl in London and George Parker in Brussels
FT

Updated: 39 minutes ago
Russia on Wednesday suddenly announced plans for repairs to railway lines to Estonia in a move that will disrupt oil and coal exports and aggravate the worsening political conflict over Tallinn's moving a Soviet war memorial.

The news from Russian state railways sent oil companies scurrying to secure transport for alternative routes for petrol, fuel oil and other refined oil products normally exported through Estonian ports, which handle about a quarter of such shipments from Russia to world markets. Coal exports will also be disrupted after the railway operator unexpectedly informed shippers of a shortage of wagons.

FT/MSNBC

[oilluber]

hey guys,,, keep up the good work and
the pessimistic data on gasoline inventories...

Now to brighten the mood alittle here,, heck , my oil stocks are
going up. Sit back and enjoy peak oil.

[eastbay]

Is this Pup55 something else, or what? I think we all should send him a cut of our take.

[shortonoil]

pup55 said:

Yes to both. This is about where it normally runs. Back in the early 90's this number frequently got into the 62-65% range but the product mix has obviously changed gradually since then.

Gasoline yield was higher in the past, but the quality of crude was a lot better. Since 1990 API has dropped about 2 points (6.5%) and sulfur content is up 33%. I guess the question I was looking to get answered is how do these factors effect product yield ratios and plant utility. Valero’s plants using the heavier Mexican crude, generally have lower gasoline yields than plants running a lighter crude, and the Mexican crude is (soon to be was) fairly low in sulfur.

We are right on the line at the present, and something like this could make the difference between maybe a few outages and a mass panic.

Like I said before, your 9.4 mb scenario is definitely optimistic.

[ColossalContrarian]

Hey pup55, Dante... have the people at Bloomberg thanked you yet?

This guy Flynn is taking your material! (from uuuuhhh… 3 weeks ago)

U.S. Inventory Data 'Very Disturbing'

[lawnchair]

Oil, Gasoline Plunge after Belgian Strike Averted

Well, the Antwerp situation is averted last-minute (as I suspect many of us thought it would be... first-worlders have too much to lose to play chicken with striking).

But, what a 1% "plunge". Gotta love Bloomberg headline editors. RBOB was already back over $2.22 while the article was still the top headline.

[linear]

hey guys,,, keep up the good work and
the pessimistic data on gasoline inventories...

Now to brighten the mood alittle here,, heck , my oil stocks are
going up. Sit back and enjoy peak oil.

Hey Oilluber. What stocks do you have. I've got COP (Conoco) and EGY. Unfortunately, COP has decided to pick a fight with Chavez and EGY has had some production issues.

[DantesPeak]

Antwerp strike averted for now.

UPDATE: Belgian Oil Unions Mull New Pay Deal; Strike Averted

DOW JONES NEWSWIRES
May 3, 2007 7:06 a.m.

LONDON (Dow Jones)--A strike threatening Belgium's oil refineries has been averted for now, after negotiators drafted an improved pay proposal for sector workers late Wednesday, union and employer representatives said Thursday.

The unions will present the draft labor agreement to job stewards Thursday night, and workers will then vote on the proposal in a May 24 referendum, said Herman Baele from the FGTB union.

"The strike has been annulled until we know what the workers think," said Baele.

Fred Van Melkebeke, spokesman for the employers' group, the Belgian Petroleum Federation said: "We have a proposal of a collective labor agreement. We have reached a compromise and a strike will be put off."

Melkebeke said that the pay deal was "unlikely" to be voted down by workers, but added that a rejection would reactivate the 9-day notice period for the strikes.

Wall Street Journal

[Geko45]

Here is an interesting article on how the inventory report just doesn't seem to have a predictable impact on trading lately. Worth a read. One notable quote in reference to the media's suggestion that market movements on Thursday are tied to Wednesday's report:

As far as the inventory numbers moving oil prices a day later, as is often reported in the media, Beutel's not buying it.

"There are no delayed reactions," he said, saying price movements the following day attributed to the report are more likely due to technical trading. "If the market goes higher for technical reasons, the editors don't want to print that. What they are doing is telling little white lies so people think they understand what's going on."

CNN: The 'little white lies' about oil inventories

[DantesPeak]

Since gasoline is at a nationwide average for unleaded regular of $1.94 now I'd say that it's a pretty safe bet that it will go over the $3 mark very soon. When will the real problems start from this gasoline shortage? Could we see $4 gas? That would be more then the Katrina spike. When do you guys see us running into problems of supply?

Dantespeak said

In the Northeast US, we switch to the summer blend of gasoline about June 1. Plus we have the traditional Memorial Day weekend at the end of May where driving demand is usually heavy. That's the time frame I see problems developing - especially if the Antwerp strike goes forward.

If we hear about the Department of Energy giving 'waivers' to various states about then, that would confirm supplies are low.

Rumors of waivers hit the markets today:

EPA Monitoring Tight Gasoline Supply but Rumors of Wavier Requests Prove Unfounded

OPIS 02:07 May 3, 2007

Oil prices fall
From correspondents in New York
May 04, 2007

Another analyst attributed the price slide mainly to the US government's announcement yesterday that it would halt buying crude for its strategic petroleum reserve (SPR), possibly for several months.

"With the DoE potentially halting the SPR purchasing until the end of the summer and the EPA (Environmental Protection Agency) hinting at a waiver of complicated summer gasoline rules, it would seem like the administration is making an attempt to head off the rising tide of gasoline prices prior to the driving season," said John Kilduff, of Man Financial.

The Australian

[strider3700]

Prices start to get high and the discussion about screwing over the environment for a quick savings starts. Is there any doubt that we'll leave this planet a smoking husk before we're finished? A fast and brutal crash is probably the most humain thing we could do at this point.