Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on July 1, 2015
Remember All That Oil in Storage? Here It Comes
Refineries around the world are using more crude oil. To get the cheapest supplies around, they don’t have to look any further than their own storage tanks.
When a global glut of crude oil sent prices plunging to near-six-year lows in the first quarter of the year, refineries started stocking up. The market gave them an incentive to do so: Oil prices for later in 2015 were higher than immediate prices, making refiners and traders eager to buy crude for cheap and store it to use or sell in the future.
The strategy worked. As more and more oil entered storage, pushing U.S. inventories to the highest level in more than 80 years and prompting some companies to stash oil on ships in the ocean, the amount of crude immediately available to buyers fell. Add in a cold winter that spurred demand, and prices rallied.
But with the global oil benchmark, Brent, trading around $63 a barrel, up more than 30% from its 2015 lows, all that oil sitting in storage is now profitable to sell. This means the world’s largest oil producers are competing with each other and with their own prior production for buyers.
“Rather than go out and commit to new supply, the refiners are drawing down their inventory,” said Lawrence Goldstein, a director of the Energy Policy Research Foundation, which receives funding from the oil industry. “It’s close to home.”
In the U.S., crude inventories have dropped from 490.9 million barrels at their peak in April to 463 million barrels as of June 19. In that same period, domestic refineries have upped their utilization from 91.3% to 94% of total capacity.
Globally, consulting firm Energy Aspects expects refineries to process 76.8 million barrels a day of crude oil into gasoline and other fuels in the third quarter, up 1.9% from the second quarter.
Inventories in Europe and South Korea are very high, Energy Aspects said, leaving refineries well-supplied.
If refineries use their own stored supplies rather than buying new crude, that could further pinch producers and drive oil prices lower. Refineries typically ramp up activity at the beginning of autumn to make winter-grade fuel.
“The usual end-Q2/early-Q3 buying will be replaced by refineries running down inventories,” Energy Aspects said in a note Monday. “With the current level of stocks, any price recovery is likely to be capped.”
13 Comments on "Remember All That Oil in Storage? Here It Comes"
BobInget on Wed, 1st Jul 2015 9:46 am
Speaking of storage:
Tankers were delayed the previous week due ta a tropical storm. This week, they unloaded.
Hence that inventory surplus.
What belies the entire ‘storage over- simplification’ myth is ACTUAL CONSUMPTION.. read, last paragraph.
Summary of Weekly Petroleum Data for the Week Ending June 26, 2015
U.S. crude oil refinery inputs averaged over 16.5 million barrels per day during the week
ending June 26, 2015, 1,000 barrels per day less than the previous week’s average.
Refineries operated at 95.0% of their operable capacity last week.
Gasoline production
Increased last week, averaging over 10.0 million barrels per day. Distillate fuel
production increased last week, averaging over 5.0 million barrels per day.
U.S. crude oil imports averaged over 7.5 million barrels per day last week, up by 748,000
barrels per day from the previous week. Over the last four weeks, crude oil imports
averaged 7.0 million barrels per day, 3.5% below the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline blending
components) last week averaged 760,000 barrels per day. Distillate fuel imports averaged
173,000 barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum
Reserve) increased by 2.4 million barrels from the previous week. At 465.4 million
barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at
least the last 80 years.
Total motor gasoline inventories decreased by 1.8 million barrels
last week, and are in the upper half of the average range. Both finished gasoline
inventories and blending components inventories decreased last week. Distillate fuel
inventories increased by 0.4 million barrels last week and are in the middle of the average
range for this time of year.
Propane/propylene inventories rose 1.6 million barrels last
week and are well above the upper limit of the average range. Total commercial
petroleum inventories increased by 10.3 million barrels last week.
Total products supplied over the last four-week period averaged over 20.0 million barrels
per day, Up By 7.1% from the same period last year. Over the last four weeks, motor
gasoline product supplied averaged over 9.5 million barrels per day, Up By 6.4% from the
same period last year. Distillate fuel product supplied averaged over 3.9 million barrels
per day over the last four weeks, Up by 4.1% from the same period last year. Jet fuel
product supplied is down 0.2% compared to the same four-week period last year.
Jet fuel down, not a good sign. Jet fuel is a
great economic indicator. One week however in nothing…There were thousands of weather related flight cancellations which doubtless took a toll.
The big picture, 20 million barrels a day may simply indicate folks were not flying but driving instead.
The next few weeks will tell.
BobInget on Wed, 1st Jul 2015 10:17 am
Look-it wa happened when EIA repor dropped.
http://www.livecharts.co.uk/MarketCharts/crude.php
It’s easy to say stocks are full while not mentioning over-all consumption is up. Plus, refineries are cooking meth at 95% of capacity. That’s as high as it gets!
Refineries get taxed on storage at the end of the year. Happy July.
If YOU were in charge of storage would you be buying at these lower prices in anticipation of higher down the road?
I’ll get to the ME situation later. Suffice to say now, loading up (on crude) today will pay huge dividends tomorrow .
Of course there are fully loaded tankers at anchor all over the globe. It doesn’t take a math genius to calculate how long that stash
lasts when the world is consuming 1.5 million barrels each day to kill other folks trying to take ‘our oil’.
Global oil demand averaged an estimated 93.3 mb/d in 1H15, up roughly 1.6 M B p/d
Figure one hundred tankers (1 million barrels each) at anchor are loaded with a full day’s Global crude oil needs.
When EIA reports that 80 year high in storage
they’re not saying we had more crude in storage in 1935 when records keeping began.
keith on Wed, 1st Jul 2015 11:01 am
I guess its time to create that blip in Q3 to rig the numbers to avoid that recession.
Plantagenet on Wed, 1st Jul 2015 11:38 am
The US just added another 2 million bbls of oil to storage.
Looks like the oil glut isn’t over yet.
rockman on Wed, 1st Jul 2015 12:10 pm
Remember not all the oil in storage is put there to be stored. Much of it is in transit between the well head and the refineries. Essentially there’s a MOL (Min Op Level) of oil in the system just as there is for NG. Difficult to find a confident number for that volume but it could be in the 200 million bbl range depending upon who you read.
BobInget on Wed, 1st Jul 2015 12:48 pm
PLATS had predicted -1.3 M B
I’m sure that would have beed a good number had the Houston Ship Canal not have been blocked the previous week.
Still, at 20 Million barrels every 24 hrs, two million represents 10% hip hip hurray!
Apneaman on Wed, 1st Jul 2015 2:28 pm
Water Used for Hydraulic Fracturing Varies Widely Across United States
“The amount of water required to hydraulically fracture oil and gas wells varies widely across the country, according to the first national-scale analysis and map of hydraulic fracturing water usage detailed in a new USGS study accepted for publication in Water Resources Research, a journal of the American Geophysical Union. The research found that water volumes for hydraulic fracturing averaged within watersheds across the United States range from as little as 2,600 gallons to as much as 9.7 million gallons per well.”
http://www.usgs.gov/newsroom/article.asp?ID=4262#.VZQ-1FIV1NH
Apneaman on Wed, 1st Jul 2015 2:35 pm
Crude oil tumbles after U.S. stockpile build
http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/crude-oil-tumbles-after-us-stockpile-build/article25216582/
dave thompson on Wed, 1st Jul 2015 4:39 pm
If the world is burning 93 million bbls per day, then 93 million has to be pumped,transported,and held on hand at any given moment. The “storage” of crude is really only a temporary holding point between extracting and refining. The idea that extracted crude is in “storage” for any length of time prior to refinement and being sold to the worlds users is delusional/ridiculous.
apneaman on Wed, 1st Jul 2015 6:56 pm
A Year of Lower Oil Prices: Crossing A Boundary
http://www.artberman.com/a-year-of-lower-oil-prices-crossing-a-boundary/
Makati1 on Wed, 1st Jul 2015 8:24 pm
WSJ, another pimp rag of Wall street. Not worth the time to read. The sooner we have the Big Crash, the more resources our kids will have to rebuild a livable world. Bring it on!
rockman on Thu, 2nd Jul 2015 6:30 am
Mak – I always like to get your views on the various subject even though there are times we don’t see matters the same. But maybe you should have read the article more closely: “If refineries use their own stored supplies rather than buying new crude, that could further pinch producers and drive oil prices lower.”
That is the essence of the article. So exactly how is pointing out that refiners might pull out oil from storage (which the bought at a lower price) and thus putting downward pressure on prices the producers receive as “pimping” for the oil patch? If they were going to pimp they would be arguing that stored oil won’t have a negative impact on pricing…right?
gary on Thu, 2nd Jul 2015 8:59 am
Nobody mentions that the latest storage drops are normal operating procedures. A drop that happens every year. This drop doesn’t represent a year over year change in consumption or a real change in production. It’s just normal.
This is why even with a drop in storage. We still remain at record storage levels.