Thursday, January 7, 2016

"Don't be fooled by year-end rise in U.S. gasoline stocks: Kemp"

Following up on yesterday's "Oil: Who Will Buy All That Gasoline?--UPDATED":
Update: I should make clear that the below discussion doesn't refer to this week's report, just to the fact that over the next few months we probably won't see any big net change in amounts, only composition of what's being exported.
Original post:
One of the misconceptions concerning the lifting of  U.S. export ban is that it would add new demand. In the short term the U.S. will simply send out crude in place of the products of distillation which were already legal to export. So no immediate net boost.
First off, according to the St. Louis Federal Reserve Bank, miles driven in the U.S. will set a record in 2015. (data through Oct. 1 released Dec. 16)*

Secondly, vehicle efficiency, measured in miles per gallon, declined for the first time in at least eight years as buyers, encouraged by low gasoline prices, went for larger machines.

With that background here's John Kemp at Reuters:
The 10.6 million barrel jump in U.S. gasoline stocks last week, reported by the Energy Information Administration on Wednesday, sent gasoline futures tumbling 4 percent and intensified the selloff in oil prices.

Estimated gasoline consumption was also down 1.2 million barrels per day (bpd), over 13 percent, compared with the prior week, adding to market alarm about the health of fuel demand.
But most of the increase in stockpiles and apparent drop in fuel consumption was likely due to year-end seasonal quirks rather a sign of slackening consumption.

The latest data on gasoline consumption, production and stocks are for the week ending on Friday Jan. 1 and straddle year-end.

In the previous five years, from 2010/11 to 2014/15, gasoline stocks increased by an average of more than 6 million barrels over the year end period, with increases ranging from 3.6 million to 8.1 million barrels.

Estimated consumption declined by an average of around 500,000 bpd between the last week of the old year and the first week of the new, ranging from a decline of 34,000 bpd to as much as 805,000 bpd.

The reported decline in consumption and increase in stockpiles last week was somewhat larger than usual but broadly in line with the seasonal pattern.

Gasoline stocks reported by the EIA include both finished motor gasoline and unfinished gasoline blending components which must be blended with ethanol before sale to motorists.

Blending components include reformulated blendstock for oxygenate blending (RBOB), conventional blendstock for oxygenate blending (CBOB) and gasoline treated as blendstock (GTAB).

In recent years, refiners have produced mostly blending components which are sold to terminals in local markets for blending rather than finished motor gasoline.

Ethanol absorbs water, which can cause problems with fuel quality, so gasoline is normally stored and transported by pipeline as blendstock and then blended with ethanol in local markets shortly before to sale....MUCH MORE
*See also the Department of Transportation's Traffic Volume Trends (11 page PDF)