API Reports a Big Increase in Crude Stocks
March 6th, 2019
The API reported a big increase in crude oil stocks of 7.3 million barrels. The market is expecting the DOE report today to show a 1.2 million barrel increase. Gasoline stocks were down 391,000 barrels and the outlook for today’s report is a decline of 2.01 million barrels. Distillate stocks on the API were down 3.1 million barrels and the expectation for today is a 1.4 million barrel decline.
The IMS non-manufacturing services index for the US rose in February much higher than expected to a reading of 59.7 versus an expected reading of 57.2.
New home sales for December 2018 were reported yesterday and came in at 621,000 annualized up 3.7% to a 7 month high. The market expected only 599,999 new home sales to be reported.
The US and China appear to be close to a deal that would roll back US tariffs on as least $200 billion worth of Chinese goods as China pledges to make structural economic changes and end tariffs on many US goods. This would boost both economies and is bullish for equities and crude oil prices as it is perceived to increase world demand for crude oil. This is a very fluid situation and you see a report like the one just mentioned and then the next story says there are some issues working out the details and the two countries are so different culturally it is hard to get to common ground. This is a big story that can and will impact the energy market. Prices have been steadily moving higher on the expectation that this deal gets done. If this deal doesn’t progress then a correction lower in energy price is likely.
The Bloomberg survey estimates for today’s DOE inventory numbers are crude up 1.028 million barrels, gasoline stocks down 1.501 and distillates down 1.252.
Goldman Sachs stated that commodities are no longer significantly undervalued in relation to current fundamentals and further growth will depend on economic improvement. It added that their forecast remained bullish in the near term. It said energy markets are already showing signs of improvement, with help from Saudi Arabia-led OPEC cuts, sanction against Iran and Venezuela, Canadian production cuts and stronger-than-expected demand in major markets.
According to 53% of respondents to a GIQ industry survey, Brent crude oil prices will average in the $60s/barrel range this year.
US shale crude oil production has been a big factor for the US oil industry for some time now and will continue to be in the future. The industry and traders are always trying to figure out the outlook going forward for US shale and what these companies will do with production. Here are some comments from two companies about their outlook and plans in the Permian Basin in West Texas. Exxon Mobile said their production in the Permian will increase to a million bpd by 2024. Its last estimates said that production would be 600,000 bpd by 2025. They currently have 48 rigs actively looking for crude oil and they plan to have 55 by year end. Exxon Mobile said that production in the Permian would be profitably at $35 dollars per barrel and above. Chevron also said they would increase their activities in the Permian Basin and would expect to reach 600,000 bpd by the end of next year. They estimate they will be at nearly 900,000 bpd by the end of 2023.
Just released private payrolls were up 183,000 in February close to expectation of 185,000. January’s estimate was revised sharply higher from 213,000 to 300,000. Moody’s economist Mark Zandi says payrolls may have reached their high watermark. He said, “The economy has throttled back, and so too has job growth. Job gains are still strong, but they have likely seen their high watermark for this expansion.