Crude Report
August 16th, 2006 by Grant in: Oil & GasThe U.S. Energy Department said today that crude inventories were down by 1.6 millions bbls for the week ending August 11, bringing the decline to 4.5 million barrels over the last three weeks.
What’s interesting though, is that imports fell last week, even though the Prudehoe Bay facility was shut down.
Gasoline inventories fell by 2.3 million bbls, confirming that demand is still strong, and is still 1.7% higher than it was at this time last year, even though pump prices are at a premium this year over last.
Refinery output was at 91.5% for the same week ending August 11, and this fact coupled with the drawdown in gasoline inventory and increase in demand should spell out the supply vs. demand case for the market.
Commentary
While the Prudehoe Bay problem didn’t seem to rear its ugly head just yet in the inventory reports, I suspect the effect is taking a while to filter back to the pump. OPEC cut its demand forecast by 80,000 bpd, citing a slowdown in the economy.
While speculation reins in the oil market, the numbers don’t lie. Demand is still high, inventories are still down, production is still stagnant, refineries are at full tilt, and pump prices are establishing a base around $3/gallon.
While it’s true the economy may be slowing, I’m not sure demand for petroleum products will follow it down on an even keel. However we are nearing the end of peak driving season, school is back in session, and the road trips are over. Just in time for natural gas to start rising in time for peak hurricane season and cooler temperatures.
Can you see a pattern forming here?
Additional Resources
OPEC Monthly Oil Market Report (pdf)
This Week In Petroleum
EIA Weekly Supply Estimate
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August 21st, 2006 at 8:01 pm
Demand will stay high and prices will stay high. Given the clear connection between the current Bush administration and the oil business, you could expect prices to drop just prior to the November elections, but I would not be surprised at $4 gas by New Years. The price may fluctuate by 10-20% in the short term, but the long term trend is up, and will be for the next few years.
August 22nd, 2006 at 8:08 pm
David, I think that’s a very interesting correlation between the Bush administration (along with future elections) and gas prices. I’ll be sure to see if the market sees the same correlation.
I think your prediction of $4 gas by New Years may be a little extreme, but I think it will all depend on world events between now and then. Demand is dropping off (as it always does this time of year) and the cooky Iranian nuclear situation may be cooling off a bit.
However, I would predict $4 gas by next July 4th.
We’ll see who’s right!
-Grant
August 24th, 2006 at 7:35 am
Sweet! A contest!
Personally, I hope you’re both wrong and gas goes to $0.99 per gallon by New Years. Fat chance of that happening, I know, but I’m not much of a gambler either!
August 26th, 2006 at 8:50 am
I’m not much of a gambler, but I don’t see gas prices falling to $0.99 any time soon. At least I hope they don’t.
The longer the high prices last, the more pressure will be put on R&D to come up with lower energy answers to our petroleum demand problem.
-Grant