Energy Market Assessment: Low expectations continue to dominate but oil inventory is low

December 10, 2024

Energy Directions, Energy Market Assessment, natural gas, oil prices

(Oil & Gas 360) – Oil & Natural Gas Prices Low Highlight That Low Expectations Continue To Dominate But Oil Inventory Is Low And The Climate Is Changing.

Technical analysis dominating today’s markets having analysis much thinner along with uncertainty high helped record-high U.S. petroleum product exports setting higher record highs be ignored/unknown. While reports of problems Over There are plentiful, the quantity of petroleum products the U.S. is exporting Over There continues setting new record highs; nice new-record highs. U.S. petroleum product exports increased 0.885 million barrels per day (mmbd) last week to 7.542 (Figure 5, blue dot). That makes 6.934 the average the last four weeks (red line), 0.570 (9.0%) more than last year (blue line). This is a prepare-for-Winter increase and will next compare to a delightfully mild Winter Over There too, last year as well as two years ago (bold line).

Figure 5: U.S. Total Petroleum-Product Exports, Latest weekly and 4-weeks moving averages(Src: Calculated from U.S. Department of Energy data) — Figure 5: U.S. Total Petroleum-Product Exports, Latest weekly and 4-weeks moving averages (Src: Calculated from U.S. Department of Energy data)

Petroleum-product inventory lower than last year and rising slower than last year, powers our Bullish Outlook because refinery runs are notably greater and need to stay greater than last year. U.S. refineries processed crude oil at a 16.910 mmbd rate last week (Figure 6, blue dot), up 0.615. That has 16.486 the average the last four weeks (red line), 0.704 (4.5%) more than last year (blue line). More being done because more needs to be done is happening and the big drop in refinery runs two years ago (bold line), which we credit to significant Climate-Change-to-cold refinery outages, will soon add more bullish, inventory comparisons.

Figure 6: U.S. Oil Refinery Runs – Four-weeks moving average and current weeks(Src: Calculated from Department of Energy data) — Figure 6: U.S. Oil Refinery Runs – Four-weeks moving average and current weeks (Src: Calculated from Department of Energy data)

While crude oil inventory is down low, natural gas inventory up near record highs is helping the many bearish and uninterested remain so. Yesterday morning the Energy Information Administration (EIA) reported that working natural gas inventory declined 30 Bcf to 3,937 on November 29 (Figure 7, red line). That 9 Bcf less than the 39 Bcf draw the consensus was expecting, 17 less than the 47 drawn over the prior five years and 50 less than 80 Bcf drawn last week last year (blue line) are all reasons to be bearish. Last week delightfully mild and Thanksgiving Day Holiday shutdowns helped natural gas for January, 2025 delivery drop to $3.043 per mmBtu Wednesday. Down from the December, 2024 contract closing out at $3.431 last week Tuesday.

Figure 7: U.S. Working Natural Gas Inventory, (Src: U.S. Energy Information Administration) (Src: U.S. Energy Information Administration) — Figure 7: U.S. Working Natural Gas Inventory, (Src: U.S. Energy Information Administration)

Last week’s inventory draw only 30 Bcf reflected only a small part of the country (and that part not highly populated) colder than normal. Cold air existing and blown South by the wind had a number of states experience colder-than-normal maximum temperatures (Figure 8, top right graph, shades of blue) and more states experience colder-than-normal, but less extreme minimum temperatures (bottom, right graph, shades of blue). Areas where most Americans live experiencing warmer than normal maximum temperatures (top right graph, shades of yellow to red) and especially the populated Northeast experiencing warmer-than-normal minimum temperatures (bottom right graph, shades of yellow to red) minimized heat needed.

Figure 8: National Oceanic And Atmospheric Administration (NOAA), National Climate Data Center; National Temperature Maps

By oilandgas360.com contributor Michael Smolinksi with Energy Directions

The views expressed in this article are solely those of the author and do not necessarily reflect the opinions of Oil & Gas 360. Please consult with a professional before making any decisions based on the information provided here. The information presented in this article is not intended as financial advice. Contact Energy Directions for the full report. Please conduct your own research before making any investment decisions.