NOESIS Site Index
September Special Report - Crude Oil and Cash Flow
Imports Summary | Archives
November 23, 1998
Crude Oil
Those who have been following the NOESIS web page should not be
surprised at what is happening this week. For months the forecast included a dip in prices in
December to as low as $8.00 per barrel. The U.S. oil companies held off their normal strategy
of pulling down inventories for year-end accounting until it appeared that we would see new, higher minimum levels at the
first of the 1999 fiscal year. However, this week's data suggests refiners may be making a last ditch effort to
reduce inventories. Stocks dropped by 2.5 million and imports dropped from 8.9 to 7.8 million
bpd. Postings for crudes slid to: West Texas Intermediate $9.50 and Kern River (13 API)
$7.00 per barrel -- a sure indication that refiners aren't interested in buying crude oil right
now! It is likely that prices will remain low as refiners adjust their inventories. Then they should
pop back up. How soon they level out and pop back depends on the refiner's target levels for
year-end inventories. At the very least, prices should increase after January 1.
FOR NOW, NOESIS is staying with its forecast, even though it looks like the price of 34 API
crude oil may dip down to about $10.00 temporarily.
Based on current industry data, it appears that the price of crude oil will go up next spring
as supplies tighten.
There are many crude oil production fields around the world which cannot be produced at less than $12.00 per barrel, so eventually
those marginal fields will be shut in. The major oil companies have already announced drastic
reductions in capital spending, which means exploration and development of newly discovered fields
will be on hold for awhile.
A REVISED FORECAST FOR 1999 will be posted at the end of December.
To read the next installment of the SPECIAL REPORT - Competition on the West Coast (or lack thereof)
click here.
Weekly Report
Crude oil inventories
decreased 2.5 million barrels from 339.2 to 336.7 million. To draw down the inventories, refiners
dropped the purchase of imported crude oil from 8.9 to 7.8 million bpd (for a four week average
rate of 8.26). The decreases occurred in PADDs I and V (defined on Index Page)
. Inputs to refineries increased from 14.9 to 15.1 million bpd, or
95.9% of capacity. Demand for distillate in the northeast seems to be picking up, which is
relieving the pressure on the refiners to find storage capacity for refined procuts.
Gasoline inventories are on track now -- refiners added 4.3 million barrels to inventories,
for a total of 206.3 million, almost the same as this time last year.
Production of gasoline increased slightly to 8.34 million bpd. Now at 525 thousand barrels
per day, imports of gasoline continued to climb, which is unusual for this time of year. Refinery
maintenance shut downs usually occur in February and March. It appears that the supply of
gasoline should be sufficient to keep prices down through that period.
Distillate levels bounced back up slightly from 145.2 to 145.9 million barrels. All of the
increase occurred in PADD I, where they should be drawn down as soon as the next cold wave
sweeps the northeast.
EIA U.S. Refining Data
Inputs and Imports are 4-week Avg
| Input/Output | Million BPD | Imports | Million BPD | Inventory | Million BBL |
Week | Nov 6 | Nov 13 | Nov 6 | Nov 13 | Nov 6 | Nov 13 |
Crude Oil | 14.905 | 15.05 | 8.364 | 8.267 | 339.2 | 336.7 |
Gasoline | 8.259 | 8.335 | 0.521 | 0.525 | 201.8 | 206.3 |
Distillate | 3.423 | 3.62 | 0.159 | 0.161 | 145.2 | 145.9 |
Resid | 0.704 | 0.725 | 0.274 | 0.317 | 41.2 | 39.5 |
World crude oil prices reported by EIA
as of November 13, 1998: Arabian Lt (34 API) - $12.10, Nigerian Bonny Light
(37 API) $11.25, UK Brent (38 API) $11.76, and Mexico Maya
(22 API)- $8.40.
Posted prices for crude oil as of November 22, 1998
were: Scurlock, West Texas Intermediate (WTI), $9.50; Louisiana Lt. Sweet Onshore $8.75,
Oklahoma Sweet $9.50; Kern River (13 API) $7.00; Kettleman Hill (34 API)
$10.05; and Wilmington (17 API) $7.60
East Coast Gasoline and Heating Oil
East of the Rockies - Production of gasoline increased slightly last week, while
stocks of gasoline in the PADDs I, II and III increased from 167.6 to 171.6 million barrels.
Distillate levels in the East remain very high. PADD inventory levels increased from
72.6 to 73.8 million barrels. Plentiful supplies and competition in the distillate market
are holding prices down. The decrease in crude oil prices may result in a futher decrease in
prices.
Gasoline prices were lower last week, and may drop even futher with the decrease in crude oil
prices. EIA reported gasoline prices per gallon
for Regular on November 13 were as follows: PAD I - $.98,
PAD II - $.97, and PAD III - 0.95.
Diesel prices on November 13 were lower:
PADDs I - $1.03, PADD II - $1.01, and PADD III - $1.00.
FORECAST: Gasoline prices will follow the price of crude oil, while competition among the
many eastern refiners will keep oil company margins slim. The recent cold snap should result in
a drawdown of distillate inventories which, in turn, will allow the refiners to make more gasoline,
which will keep prices low for the time being.
The price of heating oil should remain low through the winter of 1998-99.
Rocky Mountain Gasoline and Diesel
Rocky Mountain - the price of regular gasoline increased from $1.08
to $1.10 per gallon and the
price of diesel dropped to $1.09 per gallon.
Prices will probably mirror changes in the price of crude oil.
West Coast Gasoline and Diesel Forecast
West Coast - Crude oil input to refineries remained at 2.6 million
bpd. The feed rate to west coast refineries and the steady product inventory levels makes it
appear as if there is really only one refinery supplying the entire region. The lack of significant
inventory variation since August is unprecedented. Stocks of crude oil decreased from 69.7 to 58.1 million barrels.
Gasoline inventories crept up slightly from 27.4 to 27.9 million barrels, which is still low
for PADD V. Nevertheless, prices remain low and have been stable for weeks.
On November 13 the average price of (reg-mid-premium)
gasoline in PAD V was still $1.17 per gallon.
The price of Regular in PAD V was $1.13 per gallon.
The average price of diesel in PAD V remained $1.10 and Californian's are paying
$1.18 per gallon.
FORECAST: The price of gasoline and diesel should drop since the price of crude oil has
dropped almost 30% over the past month.
(For West Coast readers, an important supply to watch over the next couple of years is
Alaskan North Slope (ANS) Crude Oil.
The ANS link takes you to a great web site to monitor which is found at
http://www.revenue.state.ak.us/oil/index.htm.)
Many readers write in and ask for more data or specific information. You are encouraged to explore
the NOESIS Index Page and the Links Page. The
links listed have been especially selected to get you to data and information which will supplement
the information you find on the NOESIS site. They are all great sites! For EIA data used in these
forecasts, select the Energy Information Administration link. Once there, select Petroleum. Then
select "Weekly Petroleum Status Report" The TEXT version gives you basic data. Or scroll down
and select pdf, text or html files for tables and graphs. There is a wealth of information on
the EIA site. With the analytical tools you've picked up by reading the NOESIS reports, you should
be able to use most of the data! As always, if you have questions, send email.
contact George Clemen at NOESIS
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