Weekly Petroleum Status Report - 6/24/05

[BoeingBoy]

As I noted last night, crude has fallen and that continued this morning. According to Bloomberg, part of the reason has been a consensus that refinery capacity usage will be higher (95.8% is believed to be the number) and that stockpiles of distillate fuels (diesel, heating oil, jet fuel) would be higher - 1.8 million bbls - meaning less chance of shortages later this year.

So what does the weekly EIA report say?

Refineries operated at 96.3 percent of their operable capacity last week.

Distillate fuel inventories rose by 1.7 million barrels last week, but remain in the lower half of the average range for this time of year.

So these fell pretty much in line with expectations.

The rest of what the report sayed.

U.S. crude oil refinery inputs averaged nearly 16.3 million barrels per day during the week ending June 24, up 315,000 barrels per day from the previous week's average.

Distillate fuel production increased only slightly, averaging 4.2 million barrels per day.

U.S. crude oil imports averaged nearly 11.0 million barrels per day last week, up 794,000 barrels per day from the previous week, and the second highest weekly average ever.

Over the last four weeks, crude oil imports have averaged 10.5 million barrels per day, an increase of 23,000 barrels per day from the comparable four weeks last year.

U.S. commercial crude oil inventories (excluding those in the SPR) rose by 1.1 million barrels from the previous week [consensus estimates were for a drop]. At 328.5 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year.

Total product supplied over the last four-week period has averaged nearly 20.6
million barrels per day, or 1.2 percent more than averaged over the same period
last year.

Kerosene-type jet fuel demand is up 3.3 percent over the last four weeks compared to the same four-week period last year.

Spot prices for jet fuel on 6/24/05 <6/17/05> [6/10/05] (6/3/05):

New York Harbor..$1.6980 <$1.7310> [$1.6865] ($1.6810)
Gulf Coast...........$1.6755 <$1.6910> [$1.6515] ($1.6760)
Los Angeles.........$1.7650 <$1.7250> [$1.7250] ($1.7000)

Spot prices for crude on 6/24/05 <6/17/05> [6/10/05] (6/3/05):

WTI Cushing...$59.63 <$58.40> [$53.55] ($55.08)
Brent..............$57.21 <$56.91> [$51.98] ($51.90)

Current crude prices (at noonish) per Bloomberg:

WTI Cushing...$57.30 (down 0.90)
Dated Brent....$55.22 (down 1.33)
NYMEX............Bloomberg doesn't have a post-report quote
CNBC..............$57.40 (down 0.80) @11:00AM

Finally, average spot prices of jet fuel by month (by quarter once the quarter is over):

Delivery point...1Q05.....Apr05....May05.....Jun05*....2Q05**
NY Harbor..... $1.4861 $1.5836 $1.4843 $1.6896 $1.5842
Gulf Coast.... $1.4400 $1.5728 $1.4714 $1.6573 $1.5657
Los Angeles. $1.5228 $1.7980 $1.5863 $1.7225 $1.7020
* thru the 28th
**thru Jun 28

Jim

 

[jimntx]

One of the troubling things about the report is refinery utilization. I caution anyone to resist the temptation to take comfort in the fact that utlization was about what had been predicted.

The important point is that the refineries are running at 95+% capacity. That means that there is NO margin for error/mishap/etc. Refineries can not run at 100% capacity anymore than an airline can keep its a/c in the air earning money 100% of the day.

Various parts of a refinery MUST be shutdown periodically for maintenance and cleaning--refining petroleum products is a messy business. One fire and/or explosion in a major refinery--like Shell Deer Park in the Houston area or Chevron Port Arthur Plant--can materially affect refined product supplies nationwide.

 

[BoeingBoy]

Very good point, jimntx, and one I would extend to the whole chain. There is very little slack anywhere in the "pipeline" that starts at the oil well and ends at the refinery output. I even see reports of intermittent shortages of oil tankers.
Jim

 

[local 12 proud]

Ive read several articles written by "oil analyst" concerning the price of crude and they give a very disturbing future outlook. according to many experts on the subject we are at, or fast approaching what they call "Peak Oil'' meaning we have virtually used up over half the worlds oil deposit's. China is now the third largest oil consumer and India is right on there heels, soon and very soon supply will not meet demand and this is where things will get really bad and fast. We as a nation had better take conservation serious and quit depending on Foreign oil, as jimntx referenced we are one major disruption from things becoming Dire........JMHO

 

[local 12 proud]

After the Oil Runs Out (washingtonpost.com)
After the Oil Runs Out. By James Jordan and James R. Powell Sunday, June 6, 2004;
Page B07. If you're wondering about the direction of gasoline prices over ...
www.washingtonpost.com/ wp-dyn/articles/A17039-2004Jun4.html - Similar pages

 

[BoeingBoy]

Now that the markets have had the day to digest the EIA's weekly report....

Crude Oil Trades Near a Two-Week Low

Jim

 

[local 12 proud]

soon we wil back at $20 a barrel and all will be right with the world

 

[Busdrvr]

soon we wil back at $20 a barrel and all will be right with the world

[post="279571"][/post]​

History suggests that you may be righter than you think. Each and every day, new technologies get cheaper. The last time around, cars got MUCH more efficient AND more powerful. The use of oil for producing electricity plumeted. The Saudis are scared sh1tless. If you think 60 dollar oild hurts U.S. consumers, what do you think it does to consumers in India and China who have per Cap GDP's of around 1/10th of what ours is?

But in response to a previous post, we will NEVER run out of oil, and absent price controls, demand will NOT exceed supply.

 

[local 12 proud]

so fossil fuels are "INFINITE" busdriver? weve managed to consume over half the oil deposits in just over a century that took millions of years to generate but we will never run out? you crack me up! there's nothing new under the sun, just keep on keeping on!

 

[dc3fanatic]

But in response to a previous post, we will NEVER run out of oil, and absent price controls, demand will NOT exceed supply.

[post="279576"][/post]​

Supply and demand are functions that intersect on price / quantity graphs. I'm not sure I fully undestand your statement. When demand is stronger than supply, price goes up. Price has been going up. What do you mean?

And while it might take another 50 to 80 years or more to use up most of our supply of oil, there is a finite supply, right?

And why are Saudi's scared? Let me point out that they are actually investing their money . . . http://www.theworld.ae/

 

[Busdrvr]

You guys are making the mistake of confusing what you consider a physically finite supply with the effects of market forces.

1. Absent price controls and quota's, price and quantity are determined by the intersection of the supply and demand curve. By definition, demand CAN NOT exceed supply. Can demand for oil exceed supply at $20 a barrel? Absolutely. But then price goes up to a level where supply equals demand.

2. Because of market forces, we will never run out. Oil isn't sitting in giant, steel reinforced, tanks in Saudi Arabia. It in multiple crevices, often deep under the ground. There is a certain amount of oil recoverable at $20 a barrel. Then there is oil that is recoverable at $1000 a barrel. Economic forces will prevent us from EVER running out.

3. What is "oil"? Most oil used isn't the perfect very light, sweet variety. Some is even 'tar'. The heavy tars just need more refining. If all the tar and shale is counted, the supply of oil is significantly higher. Canada has more "tar" than Saudi has oil.

4. Alternative supplies: It takes between $0.50 and $0.70 cents a gallon to convert veggy oil to clean burning diesel. Veggy oil is currently more expensive than crude, but as prices continue to go up, it becomes more attractive. Currently bioD is used to "cut" the petro variety in order to meet the more stringent low sulpher standards. BioD has NO sulpher and significantly lower levels of pollutants. Additionally, Coal can be easily converted to H2 and CO2 by subjecting it to very high heat (see "nuclear") in the absense of oxygen. Supposedly, the same process was used in Germany during WW2 to produce "gas" to run cars on.

We will NEVER run out of fossile fuels, and supply will always equal demand (absent price controls and quotas)

 

[local 12 proud]

Busdrvr im not going to get into some pissing contest about what drives the price of oil, but i will say this, some very qualified experts are ringing the alarm bells about "Peak Oil". a very famous Shell Geologist, Dr. Marion King Hubbert in 1956 accurately predicted that US Domestic Oil production would Peak in 1970. yes many scoffed at him and said "we will never run out of fossil fuel" but none the less he was right on. listen very carefully, NOTHING last for ever, even that Big Bright Star that Gives Life to this Planet is slowly winding down, just as every day you wake up is one last day you have in this life, unless of course you are INFINITE!.......Cheers

 

[local 12 proud]

busdrvr, that should read one "LESS" day, but you catch my drift 😉

 

[dc3fanatic]

You guys are making the mistake of confusing what you consider a physically finite supply with the effects of market forces.

1. Absent price controls and quota's, price and quantity are determined by the intersection of the supply and demand curve. By definition, demand CAN NOT exceed supply. Can demand for oil exceed supply at $20 a barrel? Absolutely. But then price goes up to a level where supply equals demand.

2. Because of market forces, we will never run out. Oil isn't sitting in giant, steel reinforced, tanks in Saudi Arabia. It in multiple crevices, often deep under the ground. There is a certain amount of oil recoverable at $20 a barrel. Then there is oil that is recoverable at $1000 a barrel. Economic forces will prevent us from EVER running out.

3. What is "oil"? Most oil used isn't the perfect very light, sweet variety. Some is even 'tar'. The heavy tars just need more refining. If all the tar and shale is counted, the supply of oil is significantly higher. Canada has more "tar" than Saudi has oil.

4. Alternative supplies: It takes between $0.50 and $0.70 cents a gallon to convert veggy oil to clean burning diesel. Veggy oil is currently more expensive than crude, but as prices continue to go up, it becomes more attractive. Currently bioD is used to "cut" the petro variety in order to meet the more stringent low sulpher standards. BioD has NO sulpher and significantly lower levels of pollutants. Additionally, Coal can be easily converted to H2 and CO2 by subjecting it to very high heat (see "nuclear") in the absense of oxygen. Supposedly, the same process was used in Germany during WW2 to produce "gas" to run cars on.

We will NEVER run out of fossile fuels, and supply will always equal demand (absent price controls and quotas)

[post="279613"][/post]​

The quantity is still 'finite'. We are consuming at a faster rate than the earth is producing.

Alternate supplies, such as biodiesels may play a role, but they can't in the next 5 years purely due to scale and commitment.

Finally, the market does work on the supply and demand curve setting price, but you fail to address the fact that fuel could have enough demand (higher price) that makes it difficult to maintain the current level of airtravel within the nation.

When the market 'works' for fuel, that doesn't imply or mean that it can 'save' the airline industry - it really just makes you ask "how bad to you want the fuel?"

 

[jimntx]

1. Absent price controls and quota's, price and quantity are determined by the intersection of the supply and demand curve. By definition, demand CAN NOT exceed supply. Can demand for oil exceed supply at $20 a barrel? Absolutely. But then price goes up to a level where supply equals demand.

[post="279613"][/post]​

Is this the same economic maxim that allows airplanes to fly around the country jam-packed full while the airline loses money? Almost every flight I work at AA has at least one person on the oversold list from the previous flight. Seems to me that demand for seats is VERY high, yet the price doesn't seem to be going up--well, not enough to cover the cost of transporting that seat from Point A to Point B.