Report shows surprise build in crude inventories and decline in refined products

August 10, 2016 11:35 AM
Weekly Energy Market Analysis

The first round of fundamental data hit the media airwaves mid-day with the release of the Energy Information Administration (EIA) forward projections followed by the American Petroleum Institute (API) data late in the day. The EIA report was biased to the bearish side as they raised its estimated for U.S. production (see the charts below for more details).

Also, the API reported a surprise build in crude oil inventories along with a decline in refined products. Crude oil prices drifted lower on Tuesday and are mixed heading into the early Asian trading session. There is still a plethora of fundamental data that will be released during the next two days all of which are likely to be market movers.

Global equity markets ended the U.S. trading session with gains in most bourses around the world on Tuesday. The overall EMI Global Equity Index increased by 0.36% with the year-to-date gain widening to 10.7 or the highest level of the year so far and the first time the Index is showing a double-digit gain. Six of the 10 bourses in the Index remained in positive territory for 2016. China is still the worst performer in the Index with Brazil remaining on top with a 33.1% gain for the year. The positive direction of global equities market was a positive price driver for the oil complex on Wednesday.


EIA August short term energy outlook for crude

Following are the main crude oil highlights.

•          Global consumption of petroleum and other liquid fuels is estimated to have grown by 1.4 million b/d in 2015. The EIA expects global consumption of petroleum and other liquid fuels to again increase by 1.4 million b/d in both 2016 and 2017, mostly driven by growth in countries outside of the Organization for Economic Cooperation and Development (OECD). Non-OECD consumption growth was 1.0 million b/d in 2015, and it is expected to be 1.3 million b/d in 2016 and 1.5 million b/d in 2017.

•          EIA estimates that petroleum and other liquid fuels production in countries outside the Organization of the Petroleum Exporting Countries (OPEC) grew by 1.6 million b/d in 2015, with more than half of the growth occurring in North America. EIA expects non-OPEC production to decline by 0.6 million b/d in 2016 and by 0.4 million b/d in 2017.

•          U.S. crude oil production is projected to decrease from an average of 9.4 million b/d in 2015 to 8.7 million b/d in 2016 and to 8.3 million b/d in 2017. The forecast reflects declining Lower 48 onshore production that is partly offset by growing production in the federal Gulf of Mexico. EIA estimates that total U.S. crude oil production has fallen by 1.1 million barrels per day since April 2015 to an average of 8.6 million b/d in July 2016. Almost all of the production decline was in the Lower 48 onshore.

•          OPEC crude oil production averaged 31.8 million b/d in 2015, an increase of 0.8 million b/d from 2014, led by rising production in Iraq and Saudi Arabia. Forecast OPEC crude oil production rises by 0.7 million b/d in 2016, with Iran accounting for most of the increase and by an additional 0.6 million b/d in 2017. The forecast does not assume a collaborative production cut among OPEC members and other producers, as major OPEC producers are expected to continue their strategy of maintaining market share.

•          EIA estimates that OECD commercial crude oil and other liquid fuels inventories were 3.00 billion barrels at the end of 2015, equivalent to roughly 66 days of consumption. Forecast OECD inventories rise to 3.08 billion barrels at the end of 2016 and then fall to 3.03 billion barrels at the end of 2017.

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Energy Market Analysis is published daily by the Energy Management Institute 1324 Lexington Avenue, # 322, New York, NY 10128. Copyright 2008. Reproduction without permission is strictly prohibited. Subscriptions: $129 for annual orders. Editor in Chief: Dominick Chirichella, Publisher: Stephen Gloyd, Editor Sal Umek.