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Record Week of Oil Production - Fraccing Alive and Well

Topic: Energy — Oil
Jun. 24 2015, 1:21 PM ET - by VF member bz1516 (2482 gold star (click for information on feedback))

Record week of oil production - fraccing alive and well ........................

Another week of crude supply and storage data and still no clarity in my opinion. It looks like we will have to wait until July to get a better picture. Here is the current situation as of today.

June is almost over and in the latest week we had another record, an increase of 76,000 bbls/d of supply mostly from fraccing, not counting Alaska. Production still running 1.2mm bbls/d ahead of last year. At the same time imports are only down about 250,000-300,000 bbls/d.

Last year we were oversupplied about 1mm bbls/d. This year we have another almost 1mm bbls/d of both domestically produced and imported oil for a total of approximately 1.9mm bbls/d. With increased gasoline consumption of ~350,000 bbls/d and an additional 300,000 bbls/d of net exports of petroleum products, that still leaves an oversupply situation of 1.25mm bbls/day currently in June.

At the same time we see stocks dropping modestly so far, though slightly more than last year at this time. This past week showing a drop of 5mm bbls. What we saw last year in July was a drop in storage and modest increase of supply of slightly over 1% to 8.5mm bbls/d and an acceleration in the price decline.

All this points to a riddle. Supplies up this year and last, storage down, this year and last and prices stable in June, though with prices accelerating to the downward in July of last year. The adverse combination of both supply and storage data seem to add to the confusion rather than helping reach a forecast. There is obviously a transitory home for oil that is not picked up by the data collection system.

In this situation I would eliminate storage from the analysis. Based on last year at least storage does not seem helpful. What Iím left with looking only at supply after eliminating storage is supply outstripping both increased gasoline demand and net exports of petroleum products, leaving an oversupply of ~1.2mm bbls currently. With price not yet reacting Iím hoping we see resolution of this anomaly in July as we did last year.

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Record Week of Oil Production - Fraccing Alive and Well