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Falling Stocks Supports Move to $90 Crude Oil

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The Daley Note: September 27, 2023

With commercial and strategic US crude oil inventories hovering near historic lows, WTI prices have ripped higher in recent months to over $90/bbl. Facility operators have reported stocks draws eight of the last 10 weeks to the Energy Information Administration (EIA), reflecting a tighter US supply and demand balance.

According to data tracked by East Daley Analytics, today’s Weekly Petroleum Status Report from EIA for the week ending September 22 should be no different. EDA currently forecasts a commercial inventory draw of ~6 MMbbl (see table).

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WTI prices have been on a run, adding $10/bbl in the last 30 days and $20/bbl since the end of June. The WTI front-month contract traded late Tuesday (September 26) for $90.39/bbl. Supporting the move higher, OPEC+ members have extended production cuts several times since June 2023, tightening global supply.

Based on EIA’s latest weekly report, there are only 25 days of supply (excluding the Strategic Petroleum Reserve), the lowest coverage level since December 2022.

The US pipeline sample, a proxy for change in production, was roughly unchanged in liquids-focused basins (+0.11% W-o-W).

According to US bill of lading data, we expect US crude imports rose by 400 Mb/d to 6.9 MMb/d. On the demand side of the equation, EDA expects refinery utilization to be flat W-o-W, coming in at ~16.3 MMb/d. Refinery outage and turnaround data showed little change, while low stocks of diesel should keep the operational refineries running flat out.

Vessel traffic monitored by EDA along the Gulf Coast had a modest pickup W-o-W. There were 27 vessels loaded for the September 22 week vs 24 vessels the prior week. EDA expects US exports to be reported at 4.8 MMb/d.

For more information on US crude production, pipeline flows and storage forecasts, be sure to sign up for East Daley’s weekly Crude Oil Edge newsletter. – AJ O’Donnell.





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