Crude recovery watch: Mixed picture in inventories

February 18, 2015 08:05 AM
Weekly Energy Analysis

This week the EIA & API inventory data will be released on a delayed schedule due to the Presidents Day holiday this past Monday. The API data will be released late Wednesday afternoon with the EIA inventory report scheduled for release on Thursday at 11 am. Finally the EIA Nat Gas inventory report will be released on its regular schedule on Thursday at 10:30 AM EST.

My projections for this week’s inventory report are summarized in the following table. I am expecting a mixed picture in inventories this week with another build in crude oil and gasoline and a modest draw in distillate fuel with a small increase in refinery utilization rates.

I am expecting crude oil stocks to increase by about 3 million barrels with total inventories at record highs for this time of the year. If the actual numbers are in sync with my projections the year over year comparison for crude oil will now show a surplus of 58.6 million barrels while the overhang versus the five year average for the same week will come in around 70.1 million barrels.

I am expecting crude oil inventories in Cushing, Ok to show only a strong build this week as the outflow from Cushing decreased again last week and is well below the normal outflow level. With ample surplus storage capacity in Cushing storage trades are taking place and will continue to be added in the Cushing area as long as the WTI forward curve economically supports storage trades. Run rates in the PADD 2 region have increased over the last week resulting in refinery demand for crude oil in the region increasing.

The TransCanada (Keystone) Gulf Coast line decreased its pumping rate modestly last week. The line is now running below the 300,000 bpd level. Genscape is reporting a flow of 287,204 bpd or a decrease of 78,056 bpd compared to the previous week. Last week the combination of the TransCanada Gulf line and both Seaway lines moved about 6.2 million barrels of crude oil out of Cushing or about 71,109 barrels less than the previous week. In fact this was the lowest net outflow from Cushing since the end of December and could result in another strong build in Cushing inventories based solely on the pipeline data.

According to the latest data from Genscape (for more information on Genscape data products visit their website) pipeline outflow from Cushing decreased slightly after decreasing strongly during the previous week even as the combined flow rate on the TransCanada Gulf Coast and the Seaway pipelines increased modestly. For the week ending Feb. 13 total net outflow from Cushing decreased by an average of 4,559 bpd. The Seaway pipeline decreased slightly by 7,822 bpd and averaged 349,851 bpd while Seaway Twin averaged 251,514 bpd for the week ending Feb 13th. The inflow into Cushing increased strongly by 136,919 bpd even as Flanagan South Pipeline pumping rate decreased modestly last week to 389,043 bpd. The Hawthorn pipeline is flowing for the sixth week in row but at a lower rate than the previous week.

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