PeakOil.com: Weekly Petroleum Supply Report 6.6.10

Well, here is the situation we are faced with this morning:

1. A giant blob of toxic goo is sitting out in the Gulf of Mexico, offshore, mainly submerged so no one can see it, killing everything it touches.

2. There was a Category 1 hurricane last week that parked itself over Mexico’s biggest oil field, and also, caused 12-foot waves over the oil slick zone causing the recovery operations to be stopped for a few days.

3. We found out just how stinking the US economy really is, when two statistics were released: Another 650,000 workers in the US just gave up trying to find jobs, thus causing the “unemployment rate” to drop, and also, new housing projects reached their lowest level in several decades, meaning that no one in the country still knows how much his or her house is worth right now, a situation that has been going on for a long time…..

4. Despite all of this, I think you will see that demand for unleaded fuel will be back at or near pre-recession levels this week, because everybody was just sick of staying home and listening to bad news. At least around where I was, traffic was just stupid on the highways this weekend. and jet ski traffic was at its most annoying level in about 4 years.

5. The refinery system is at about 88-89 percent of its maximum operating level. Normal for this time of year should be about 95 percent, and people should be making money, but they aren’t. It’s not going to get any better any time soon.

A slight complication is that this will be the first week that will test some of the tweaks the EIA made in the weekly reporting system, since they are reporting moving averages for demand and domestic production. I think the effect of the storm will be about .4 mbpd reduction in imports, and also, .3 mbpd reduction in domestic production, so we should have a pretty sizeable drawdown in crude oil, but the way the numbers are now reported, it might or might not show up all at once. It will take awhile to learn exactly how this sort of event, happening at a time of pretty high demand, will have on the actual inventory numbers.

So we have some excitement to look forward to this week, maybe. Maybe not. Boring weeks have been known to happen too.

…
[quote]U.S. gasoline demand jumped to a five-week high as drivers filled their tanks for the July 4 holiday weekend, according to MasterCard Inc. Motorists bought an average 9.65 million barrels a day in the week ended July 2, the second-largest payments network company said yesterday in its SpendingPulse report.

Gasoline inventories increased 100,000 barrels last week from 218.1 million, according to the median analyst estimate before the Energy Department’s report at 11 a.m. in Washington., Distillate fuel stockpiles, including heating oil and diesel, probably gained 1.6 million barrels from 159.4 million.

The Energy Department yesterday raised its outlook for global oil demand this year to 85.82 million barrels a day from 85.51 million in June, an increase of 1.9 percent from 2009. In its monthly Short-Term Energy Outlook, the department also forecast an average oil price of $78.69 a barrel from $61.66 last year. [/quote]

[quote]U.S. crude stockpiles fell 2 percent to 351.8 million barrels last week, the biggest reduction since September, the American Petroleum Institute reported. The Energy Department will release its own weekly data today. The International Monetary Fund raised its forecast for global growth this year, reflecting a stronger-than-expected first half. [/quote]

[quote]Commercially held U.S. crude stockpiles fell for a second week to their lowest level since March, the industry-funded API said. The Energy Department may report a 2 million-barrel decline today, based on the median estimate from 15 analysts surveyed by Bloomberg News. [/quote]

[url]http://www.bloomberg.com/news/2010-07-08/crude-oil-rises-to-one-week-high-as-u-s-retail-sales-gain-supplies-drop.html[/url]

[quote]U.S. oil data for the week to July 2 will likely show a drop of 2.3 million barrels in crude stocks, a fall for the second consecutive week, due to lower imports in the United States, a Reuters poll of analysts showed.

Gasoline inventories were forecast down 200,000 barrels.

The release has been delayed by one day due to the U.S. Independence Day holiday Monday.[/quote]

[url]http://www.reuters.com/article/idUSTRE65D3YT20100707[/url]

I think the reuters guy must be tuning into this thread every week.

[quote]The consensus of six analysts polled by Dow Jones Newswires is for the EIA data to reveal a 1.8-million-barrel fall in crude oil inventories. All but one analyst predict a decline, with forecasts ranging from a drop of 3.5 million barrels to an increase of 1 million barrels. [/quote]

[url]http://online.wsj.com/article/BT-CO-20100708-701732.html[/url]

Update:There were actually only two numbers on this week’s WPSR that were a bit unusual.

The Mainstream Media will focus on the 5 million barrel drawdown in crude oil, but I am not going to mention this as one of them, because the frequent viewers of PO.com have been treated to forecasting brilliance, since we have known since Tuesday what was going to happen. Crude oil imports declined to 9.3 mbpd due to the hurricane effects, precisely as we had predicted, and refinery inputs remained more or less the same as they have been for the last couple of months. Actually, the frequent viewers of PO.com well know that I am practically never this close, but this week happened to get it right.

The two numbers that really were unusual were the demand for distillates, which were up around 3.9 mbpd, much higher than we had seen for the last couple of weeks, and the imports of unleaded, which in all probability were brought into the country in anticipation of the holiday demand. Distillate demand was 3.55 mbpd last week, and so this jump in demand was big, counterseasonal, and unexpected. Unleaded imports had been running .8 mbpd, but jumped up last week to over 1.0, and this week were at 1.2, which was 2/3 of my forecasting error in predicting the inventory levels for this week. Both of these unusual numbers caused the unexpected increase in unleaded inventory, and the unexpected non-build in distillates.

Unleaded products supplied was .2 mbpd higher than it was last week, reflecting the holidays, and my little demand algorithm that calculates the actual demand was right on the money.

Refinery utilization remains at 89% which is a continued disaster for this industry, it should be around 93-95% for these people to stay in business. Domestic crude oil production did not reflect the .3 mbpd decline that we should have seen because of the hurricane conditions last week, but this number is a 4-week moving average and so it may take just a little while for it to show up.

Preview of next week: Watch to see what happens to the crude oil imports. TD-two brewed up within the last day or so, not as serious as the first storm, but in the same area, and it will have some effect on shipments from Mexico. Also, sometimes there is a correction the week “after” a hurricane, that represents shipments that were delayed a few days, so this whole system is a bit upset at the moment. Also, watch the distillate demand number, which, frankly, really was unexpected.

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