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The EIA released the latest Weekly Petroleum Status Report for the week ending November 17, and we provide our thoughts on the data within the context of our forecast refinery balances.  In sum, the crude oil draw was roughly in line, the negligible gasoline stock increase was somewhat constructive, while the distillate build was bearish, all relative to consensus expectations.

Turning first to crude oil, the EIA reported that commercial inventories fell by some 1.9 million barrels to 457.1 million barrels, below last year by 31.9 million barrels.  Stocks in PAD II fell by 2.4 million barrels, including a draw at Cushing of 1.9 million barrels.  Supplies in PAD III declined by 2.5 million barrels.  Adding up all other districts yields a stock build of 3.2 million barrels.

Refiner crude oil inputs recovered by 199 MB/D from the previous week and exceeded 16.8 MMB/D.  Gross crude oil imports eased by 25 MB/D and averaged almost 7.9 MMB/D.  Estimated gross exports recovered by 469 MB/D and averaged almost 1.6 MMB/D.

We would note, however, that adding up the individual variables implies a stock decline in excess of 6.0 million barrels, i.e. comparable to the magnitude reported by the API.

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11-15-17 amupdate
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Summary of Current Market Conditions

Overview

 

  • Hydrocarbon prices rose over the weekend.  NYMEX crude oil up $0.30 to $55.94 per barrel; ICE Brent up $0.41 to $62.48 per barrel; NYMEX natural gas up $0.086 to $3.070 per mmBtu.

 

News/Views

 

  • Thus far this Monday morning crude oil prices are firming modestly in a follow-through to Friday’s gain, reflecting the new consensus view of a “tightening” market as well as word of the princely purge in Saudi Arabia.  In terms of the latter, we are somewhat surprised that oil prices are not rising more, given the “traditional” knee-jerk reaction to any surprise political developments out of the Kingdom, but perhaps the market is assuming, correctly in our view, that Crown Prince Mohammed bin Salman has no intention at this point of revising Saudi oil policy.

 

  • To put current prices into perspective, in our November 1 report we stated, “We also estimated where CFTC-reported Managed Money might now stand at $55.00 per barrel, using the last two weeks implied price gain per reported increase in futures-only net length.  If the relationships of the last two reporting periods held over the past week, it would imply that futures-only net length now stands at about 316,400 contracts.  If so, this still lies short of the record of 405,328 contracts set on February 21 of this year.  Taking the exercise further, if the relationships we devised are reasonable and funds take futures-only net length up to the February 21 record, it would imply that the December NYMEX crude oil contract would reach about $62.45 per barrel.

 

  • As our table below reveals, on October 31 when the prompt NYMEX crude oil contract settled at $54.38 per barrel, Managed Money futures-only net length stood at 295,232 contracts, so it looks like our arithmetic was almost dead on the mark.  More importantly, however, if we perform the same exercise with the data between October 24 and October 31, it would imply that the record would now be matched at “only” about $58.20 per barrel.

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