Weak Demand ... Crude Inventories Increase

Weak Demand ... Crude Inventories Increase

6th November 2015

The U.S. onshore rig count continued lower this week, down 2, providing little to no impact on the U.S. production decline rate.  

Refineries increased operating rates last week and have typically boosted utilization in November during four of the past five years, as the annual maintenance period finishes and plants ready for winter demand.

The tepid demand, restrained by mixed economic data, abetted crude stocks to increase by 2.85 million barrels last week.  That brings the total crude added over the past six weeks to 27.4 million barrels.  There is a large global glut of oil and it is finding a home in U.S. storage tanks and causing downward price pressure.

Crude supply should start to draw down once more refining capacity returns.

Source: EIA Data and GCA Analysis

U.S. Drilling Activity…..

The total number of active onshore rigs now stands at 740, down 1,136 (~60%) from a November 2014 high of 1,876.  Across the three major unconventional basins, the oil rig total declined to 345 (down 4 last week), with Eagle Ford down 3, Permian down 2 and Williston up 1.  Horizontal rigs increased by 2, reversing the downward trend.

Total U.S. rig count (including the GOM) declined 3 last week, with rigs targeting oil declining by 6 for a ten-week total of 103.  

Oil Price….

Brent and U.S. crude futures headed for a weekly loss as the dollar added to the bearish sentiment in oil since Wednesday's government data showing a sixth weekly build in U.S. crude stockpiles.

Brent, the global benchmark for oil, was down US$1.62 at US$47.53 a barrel, reflecting a loss of 3% on the week.

U.S. crude slid US$1.56 to US$44.42, down 3% on the week.

U.S. Supply and Demand…..

U.S. crude oil refinery inputs increased to an average over 15.6 million barrels per day, with refineries at 88.7% of their operating capacity last week.

On the supply side, U.S. oil production in the Lower 48 increased by 44,000 barrels per day last week, with total production at 8.651 million barrels per day.  Impacts from new GOM projects, contining to ramp production, offset onshore decline.

U.S. crude imports averaged over 6.9 million barrels per day last week, a decrease of 89,000 barrels per day from the previous week.

Crude oil inventories increased by 2.8 million barrels from the previous week; the crude build continues from lower processing of oil in the U.S. as refiners shut down for maintenance after the peak summer driving season.  Cushing’s storage, the main price point for WTI, declined by 0.2 million barrels per day.

Source: EIA Weekly Update and GCA Analysis

The low refinery runs are diminishing and crude inventories are expected to remain flat to small increases existing 2015.  At 482.8 million barrels, U.S. crude inventories still remain above historical levels. 

 

Authors

Weak Demand ... Crude Inventories Increase

P Kevin Galvin

Principal Advisor, Field Development Planning - kevin.galvin@gaffney-cline.com
Weak Demand ... Crude Inventories Increase

Bob George

Regional Director: Americas - bob.george@gaffney-cline.com

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