Oil Inventory Reports

Traders will be looking at this week’s DOE report for its usual slate of headlines, but we feel that utilization and crude oil imports are two of the most important figures we will get from this week’s statistics.  Crude oil imports have increased substantially over the last few weeks, and the need to do something with the extra crude has put refiners in a tough position.  Crude oil imports were 51.9 million bbls higher than a year ago after the release of this week’s corresponding report, so refiners are not eager to see crude stocks build appreciably from here.  They have recently increased utilization, but there are risks attending that approach as well.  This is the big developing story here.

DOE History

Distillate stocks have dropped in eight out of the past nine years, by an average of 1.100 mln bbls.  The nine-year average is a draw of 0.967 mln bbls.  Gasoline stocks have fallen in seven of the last nine years, for a seven-year average draw of 2.414 mln bbls.   The nine-year average was a draw of 1.678 mln bbls.  Crude oil stocks have been higher in five of the last nine years for a five-year average build of 3.740 mln bbls and a nine-year average build of 1.000 mln bbls.  Utilization has been higher in six of the last nine years and has a nine-year average increase of 0.5%, with a nine-year average utilization figure of 89.28%.  The five-year, pre-hurricane utilization average was 93.02%.  Since Katrina, refineries have run at an average utilization rate of 84.60%.  Crude oil imports have averaged 9.528 million bpd over the last six years.  Last week’s imports were only 33,000 bpd higher than that figure, but they were higher, and they have increased dramatically in relation where they were prior to the most recent report.

Last Week’s Inventory Comparison

Distillate stocks are now 1.9 million bbls, or 1.32%, higher than a year ago.  Heating oil inventories are 5.4 mln bbls, or 14.63%, higher than they were a year ago.  Gasoline stocks are 5.9 mln bbls (up 2.72%) higher against a year ago.  Crude oil stocks are now 9.8 million bbls, or 2.68%, lower than a year ago.  Residual stocks are 2.2 mln bbls (5.66%) lower than a year ago, jet fuel stocks are 0.5 mln bbls, (1.20%) higher than a year ago.  Utilization is 2.70% higher than a year ago and 4.24% below the eight-year average.  It is 8.28% lower than the four-year, pre-Katrina average and 0.25% below the average of the four years since the big hurricanes (Katrina & Rita) in 2005.

Last Week’s Demand

Four-week, total refined products demand came in at 19.024 million bpd, down 0.187 mln bbls on the week, and up 0.359 mln bpd and 1.92% against a year ago, reportedly.  Eight weeks ago, it was 0.159 mln bpd and 0.83% lower than a year ago.  Four-week gasoline demand is at 9.018 mln bpd, up 1.68%, compared to down 1.26% seven weeks ago.  It was up 21,000 bpd on the week.  Four-week distillate demand is now at 3.714 mln bpd, down 0.21%, compared to down 9.08% nine weeks ago.  Four-week jet demand is now at 1.387 mln bpd, down 3.75% against a year ago, compared to up 8.17% 13 weeks ago.  Four-week residual fuel demand is at 0.555 mln bpd, down 8.712, compared to up 25.96% four weeks ago.   Propane use is down 9.76% to 1.045 mln bpd, compared to 1.330 mln bpd (up 7.34%) two weeks ago.  These numbers failed to show any decisive or dramatic uptick in demand.  Total demand is down 336,000 bpd over the last two weeks.

Last  Week’s API Report

This week’s API report showed a mild build of 1.070 mln bbls in crude oil stocks, an unexpected build 0.723 mln bbls in distillate stocks and a bigger-than-expected draw of 2.957 mln bbls in gasoline inventories.  Utilization was up 2.6% to 84.7%.  Implied demand came in at a strong 9.835 mln bpd in gasoline (three of four strong weeks now) and at 4.056 mln bpd in distillate.  Crude oil imports were up 737,000 bpd to 9.940 mln bpd.  This week’s report was bullish for gasoline – through inventories – but higher imports and utilization rates could mean higher output in future numbers.

DOE Inventory Statistics

Open Interest Analysis

Crude oil open interest grew by 15,199 contracts on Thursday, when prices dropped. That looks like new selling, which would be bearish.  That looks like new selling, which would be bearish.  Open interest is up 81,256 contracts over the last five sessions.

Heating oil open interest fell by 5,686 contracts on Thursday, when prices were lower.  That looks like long liquidation, which would be supportive.

RBOB open interest grew by 1,077 contracts on Thursday, when prices were lower, which looks like new selling.  Nevertheless, someone is still buying.  Since March 1st , open interest is up 62,197 contracts.

Natural gas open interest grew by 9,139 on Thursday, when prices were lower.  That looks like new selling and is bearish, but open interest has been growing, and someone is buying.  If prices turn, it will be accumulation.

Thursday’s  Open Interest Changes:

Crude 1,365,102  up 15,199 Heat 316,911  dn 5,686 RBOB 324,424 up 1,077Nat gas 862,934 up 9,139     

CFTC Commitments of Traders for Nymex (Forensic analysis for the period ended Tuesday, April 6th)
 

Crude oil prices rallied $4.47/bbl over the latest reporting period, and the best buying came from Managed Money accounts, which added 23,312 new longs and only 6,058 new shorts.  Surprisingly, Producers were the next best buyers, adding 14,331 new longs and adding 7,911 shorts.  Both big buyers also were active sellers.  Other Reportables added 3,425 longs, but they added 9,695 new shorts.  Swap Dealers were the heaviest sellers, adding 7,579 new shorts while liquidating 11,624 existing longs.  Between funds and producers, though, 37,643 new longs were added, against only 13,969 new shorts – almost 3 to 1.  That was during the period when prices were still rising, and we are already keen to see who was buying and selling after Tuesday, when prices ended lower each day.  Open interest has jumped 81,256 contracts over the last five trading sessions, and that suggests a move to be unleashed.

In heating oil futures, prices gained 13.67 cents a gallon and the buying by Managed Money accounts was dramatic.  They added 11,320 new longs against just 1,540 new shorts.  Other Reportables and Swap Dealers had little impact, with the first group adding 208 longs and 554 shorts, while dealers liquidated 166 longs and covered 97 shorts.  Producers lined up on the short side, liquidating 13,003 longs and covering just 2,414 shorts.

Gasoline prices rose 7.62 cents a gallon during the period under review.  Here, as well, it was Managed Money accounts pushing prices higher, adding 5,122 longs and just 151 shorts.  Other Reportables added 922 new longs and added 659 new shorts.  Swap Dealers were selling 1,101 longs and added 480 shorts.  Producers liquidated 1,815 longs and added 4,073 shorts.

    In natural gas, prices rallied 12.3 cents during the period under review.  Managed Money accounts were selling and everyone was buying.  Managed Money accounts added 1,500 longs and 12,364 new shorts.  Other Reportables added 3,079 longs and covered 50 shorts.  Swap Dealers added 6,798 longs and added 1,978 shorts.  Producers added 11,927 longs and 6,635 shorts.  The buying came from the same sources hat have been buying on the way down, but their buying was strong enough to outbid the selling by managed money accounts for the week in question.  If managed money turns buyer at any stage, prices could advance vigorously.