Todays detailed Oil Thug report courtesy of a site called The Realist:
The entire article is full of sentences that contradict each other and clear lies by the Thugs from one paragraph to the next.
It's hysterical if not sad.
9-22-2014
http://marketrealist.com/2014/09/must-know-energy-investors-monitor-crude-oil-inventories/
Refineries are operating at relatively high operating capacity for this time of the year to capture high profit margins.
Low input levels resulted in a lower operating capacity.
Refineries operated at 93 % of their capacity last week
Refiners usually schedule maintenance for September and October as they transition to winter-grade fuel from summer-grade fuel. As refineries demand less crude oil and while crude oil production continues to grow, WTI crude oil prices will be under pressure.
U.S. refineries enter planned seasonal maintenance from September to October, as the federal government requires different mixtures in the summer and winter to minimize environmental damage.
As demand for crude oil falls, oil producers might face lower WTI crude oil prices. Producers like Hess Corp. (
HES), Anadarko Petroleum (
APC), Murphy Oil (
MUR), and
Chevron Corp. (
CVX), anticipate that this might hurt their margins in the interim period.
Last week, refiner and blender net production of gasoline fell 257,000 bpd (barrels per day) to 9.24 million bpd. Meanwhile, implied demand increased by 96,000 bpd to 8.70 MMbbls per day last week.
As a result of the greater-than-anticipated demand, inventories declined slightly more than anticipated. A rise in gasoline demand is bullish for gasoline prices.
The EIA reports that distillate inventories are still below the five-year average despite the increasing inventories. This finding is likely because U.S. refiners have been exporting diesel to other countries.
Demand rallied, however, increasing by 427,000 bpd to 3.83 million bpd. In this scenario, where demand increases but production declines, inventories usually decrease. But this was not the case last week.
This is likely because of low international demand for distillates, which means that smaller exports offset the increased demand back at home.
Despite the current downside that distillates are experiencing, production is expected to grow by the end of 2014.
Refineries have been constructing new capacities to produce more distillates than gasoline in anticipation of strong global distillate demand growth.
Cushing inventories had been declining for much of the year (see the graph above) thanks to new infrastructure that came online and enabled increased movement of Cushing crude.
These new projects include TransCanadas Keystone Pipeline, Sunoco Logistics (
SXL) Permian Express pipeline,
Magellan Midstream Partners (
MMP) Longhorn pipeline, and the Cushing Marketlink pipeline. As a result of these pipelines, flows from Cushing to the Gulf Coast are no longer constrained.
Plus, sustained high crude oil runs at refineries in the Midwest and the Gulf Coast, which are receiving supplies from Cushing, have also resulted in a decline in Cushing supplies.
As new pipelines are built to bring more crude from Canada and North Dakota (Bakken) to Cushing, the downward trend may not persist. The Pony Expressoperated by Tallgrass Energy Partners (TEP), which connects Guernsey, Wyoming, with Cushing, is expected to start shipping in October.
Crude inventories are likely to increase in the coming few months as refineries enter into seasonal maintenance and rising output from shale formations continues.
Brent crude prices have been weak lately, falling from levels well in excess of $110 earlier this year closer to levels well short of $100 now. This weakness has been driven by ample supplies of light crude oil like Brent on either side of the Atlantic coupled with sluggish demand the world over.
Given strong refiner demand and more robust economic activity in the U.S., WTI had been supported lately. This trend has led to the WTI-Brent spread staying relatively narrow, at around $5.
A narrower Brent-WTI spread reduces a special advantage available to U.S. refineries, as the prices for their products are benchmarked to Brent crude while their input costs are driven by cheaper WTI crude.
So, if WTI-Brent were to narrow, it would hurt the margins of refineries like Valero Energy
Phillips 66 (
PSX), HollyFrontier (
HFC), and Marathon Petroleum (
MPC) are other refineries that the WTI-Brent spread affects. Note that most of these companies are components of the Energy Select Sector SPDR ETF (
XLE).