Actual Build/(Withdrawal): 4,512
Economist Average Estimate: 4,595
Demand of ~18.6 Mmbpd decreased ~5.3% w/w, and the four-week moving average decreased ~70 bps to ~3.9% higher y/y. Gasoline demand of ~8.5 Mmbpd was down ~1.3% w/w, and distillate demand decreased ~7.3% to ~3.8 Mmbpd. In ’15, we expect U.S. demand to increase ~1% y/y to ~19.2 Mmbpd.
Composite inventories increased ~6.9 Mmbbls, versus the consensus estimate of a ~0.7 Mmbbls build w/w. API reported a ~3 Mmbbls increase in composite inventories w/w. Crude oil supplies grew ~4.5 Mmbbls, while consensus expected a ~4.8 Mmbbls increase and API estimated a draw of ~0.4 Mmbbls. Gasoline stocks decreased ~0.2 Mmbbls versus the consensus estimate of a ~1.8 Mmbbls draw w/w. API reported a build in gasoline stocks of ~1.7 Mmbbls w/w. Distillate inventories increased ~2.5 Mmbbls w/w, versus the consensus estimate of a ~2.3 Mmbbls draw. API reported a build in distillate stocks of ~1.7 Mmbbls.
Cushing stocks increased ~2.3 Mmbbls w/w to ~51.5 Mmbbls (~61% of capacity), while API reported a build of ~2.2 Mmbbls. Midwest stocks grew ~1.6 Mmbbls to ~134.9 Mmbbls (~59% of capacity). WTI decreased ~$0.45 after the report release and is currently down ~$0.60 today at ~$47.70.
Raymond James Equity Research
This week’s petroleum inventories update was bearish relative to consensus. “Big Three” petroleum inventories (crude, gasoline, distillates) rose by 6.9 MMBbls, vs. consensus estimates for a build of 0.7 MMBBls. Crude inventories were fairly neutral, rising by 4.5 MMBbls compared to a consensus build of 4.8 MMBbls. Continuing the year-to-date trends, Cushing crude inventories rose by 2.3 MMBbls and the Gulf Coast climbed 2.5 MMBbls. The refined products side came in bearish, with gasoline posting a mild draw, whereas distillates unexpectedly built. Total petroleum inventories were up 2.5 MMBbls.
Refinery utilization rose to 87.8% from 86.6% last week, primarily along the East Coast. Total petroleum imports were 8.3 MMBbls per day, down from last week’s 9.4 MMBbls per day – keep in mind that next week’s import data will be impacted by the Houston ship channel closure. Total petroleum product demand decreased 5.3% after last week’s 0.6% decrease. On a four-week moving average basis, total demand gained 3.4% y/y.
The exceedingly sharp correction from mid-2014 through the present took oil prices to six-year lows in January, with only a small bounce since then. During this time, negative datapoints have come out of several key economies: China, Japan and the eurozone. Demand continues to decline for OECD countries in aggregate, and demand growth in China and other emerging markets is slow, in part due to declining oil intensity. On the supply side, non-OPEC supply is still growing, driven largely (though not exclusively) by robust growth in the U.S. – although the industry’s severe spending cuts will gradually slow the growth curve. One wildcard remains the possibility of supply disruptions (above and beyond the outages in Libya). The geopolitical risk premium in oil prices has subsided, strength in the U.S. dollar has further pressured oil prices, and OPEC’s decision last November not to cut production eliminated that potential source of support. Bearing all that in mind, in January we cut our 2015 Brent forecast from $90/Bbl to $68, and WTI from $75 to $62. We anticipate that prices will continue to bottom in the first half of 2015, followed by a more durable recovery in the second half and into 2016 – but not back to triple digits. The 12-month futures strip is currently at $59.76/Bbl for Brent and $53.50/Bbl for WTI.
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