Thursday, April 9, 2009

Oil Inventories on the Rise?

U.S. Oil and Gas Demand and Supply: Inventories on the Rise?

  • EIA: (week ending April 3). Refineries operated at 81.8% of their operable capacity, below the 5 year average. Gasoline production increased averaging 9.0 million barrels per day. Crude oil inventories increased 1.7mb to 361.1 mb, the latest of several weeks of increase and well above the 5yr average range. Gasoline inventories increased 0.6mb and are below the five year average
  • Oil imports averaged 9.4mbd for the previous four weeks, slightly lower than a year ago. Demand for oil products has fallen 4.4% y/y for the last 4 weeks, much less than the 7% y/y decline of mid 2008 but a sharper decline than that of February. Demand for Gasoline fell 0.2% y/y and demand for distillates (-7.2%) and jet fuel (-2.0%) is lower.
  • BarCap: gasoline is emerging as the strongest of the oil products, with demand recovering from the severe declines seen in Q3. Having represented as much as a half of the overall y/y decline in OECD oil demand in the middle of 2008, gasoline now makes up less than a fifth of that overall decline and may return to y/y demand growth before the other main products.
  • jet fuel consumption dropped by 100 tb/d, or 6.2%, in 4Q 2008. With little immediate prospect of recovery, aviation fuel demand will decline by another 60,000 b/d in 2009 (EIA). By late February, jet fuel prices were $1.21/gallon, a 57% drop from 2008.
  • OD: weekly figures may overstate actual demand for oil products compared to the monthly figures and thus overstate 2009 demand. The overestimations were mostly in the other than gas segment
  • Oil and oil product supplies are building up around the world as demand falls. Oil majors are stockpiling oil in supertankers for sale in the future when oil prices are higher, contributing to a widening contango effect in which future prices are higher than those closer in time. US inventories are above 5 year averages as are those in the rest of the OECD
  • Merrill: global petroleum product demand has sunk despite the very cold Northern Hemisphere winter, driving refinery capacity utilization to very low rates on both sides of the Atlantic Basin. Total oil demand growth in the United States is still falling at a 5% annual rate, and is at 2002 levels. Despite much lower retail prices, the contraction in US gasoline demand has accelerated on the back of a 50% drop in car sales and a collapse in miles driven. Gasoline demand has only declined for 14 months so far compared to an average of 25 months in the recessions of 1973, 1981 and 1991.

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