US crude production growth verified – Deutsche Bank

The research team at Deutsche Bank explains that the United States monthly crude oil production data, published a month in arrears by the EIA, validated weekly figures with its latest update.

Key Quotes

“Although January monthly production data had showed the first meaningful downside deviation (-103 kb/d) from the weekly data, this difference was eliminated. February crude oil production data rose by +193 kb/d mom, catching up the January difference and then some. Weekly data do not take into account petroleum movements and incorporate a smaller survey sample size. Consequently, monthly data are back in line with weekly figures, confirming continued production growth.”

“US crude oil inventory decline goes further

United States commercial crude oil inventory data (excluding SPR) released by the EIA has more closely followed the more bullish of two wildly divergent paths we outlined two weeks ago (US exports its oil surplus - 24 Apr 2017), which differ only in refinery utilisation.

The main change on the week was in the error term, which is another way of saying that the change in the rate of drawdown is unexplained by production, refinery runs, imports and exports. Instead of a weekly inventory reduction of -3.64 mmbbl, -0.93 mmbbl was reported this week. Of this +2.71 mmbbl weekly variation, +1.996 mmbbl was unexplained. The remainder is explained by a +28 kb/d increase in production, a -34 kb/d reduction in net imports, and a -108 kb/d reduction in net refinery inputs, yielding a +102 kb/d looser balance, and equating to weekly drawdown which was smaller by 714 kbbl.”

“Tightening narrative based on refinery utilisation remains valid

The dreaded increase in oil product inventories has been so far averted for one more week, as net product exports rose by +245 kb/d from 2.459 mmb/d to 2.704 mmb/d, mainly on account of finished motor gasoline net exports (+190 kb/d). Consequently the total combined surplus of crude oil and petroleum products is back in line with last year's level, after having moved higher in the first quarter.

Although refinery utilisation fell slightly from 94.1% to 93.3%, this is still a seasonally-strong reading, and the previous narrative remains largely in place. Namely, (i) strong refinery utilisation is tightening the United States domestic balance, and (ii) strong oil product exports are forestalling a significant further accumulation in oil product inventories, which also remain abnormally high by historical standards.”