Oil Supplies Grow as Global Economy Stalls
September 10, 2020
The inventory report from the API said that crude stocks were up 3 million barrels to a total of 504.1 million barrels and the estimates for today’s DOE inventory update from Reuters is crude stocks down 1.4 million barrels. Cushing, Oklahoma crude stocks were up 2.6 million barrels. Gasoline stocks were down 6.9 million and the estimates for today is for then to be down 2.4 million. Distillate stocks were up 2.3 million barrels and the estimate for today are for them to be down 557,000 barrels.
The market bounced yesterday after the big sell off the prior day recovering from oversold territory. The high volatility so far this week reflect the uncertainty currently in the market.
The EIA monthly short term energy outlook (STEO) was released yesterday and overall was seen as bearish. The EIA raised their world petroleum supply forecast and lowered their demand forecast for 2020 for a net increase of 448,974 bpd. They also reported the net change in 2021 would be a rise of 541,268 bpd in world petroleum. Also seen as a negative was the EIA raising their US crude oil production forecast for 2020 by 120,238 bpd. The EIA did lower their outlook for US crude oil production in 2021 by 24,512 bpd.
It looks like a stalled global economic recovery from the coronavirus pandemic is again leading to a new build up in global oil supplies, pushing traders to store millions of barrels of crude and refiner fuels at sea. Reports say Trafigura has chartered at least five of the largest tankers for storing oil, while Vitol, Litasco and Glencore also booked large tankers in recent days.
Morgan Stanley revised its assumption for when oil demand returns to pre-COVID 19 levels from the end of 2021 to mid-2022. It sees a steadily under-supplied oil market in 2021 by about 1.1 million bpd and sees inventories largely normalize by the end of next year.
The estimate for today’s propane inventory update is that supplies will build by 2.73 million barrels. The five year average is very close to that level at 2.765 million barrels build. With crude selling off and the current weather outlook sentiment for propane has turned a bit negative and prices have eased back.