One reason I think why gasoline and distillate inventories are not growing is that refining capacity has decreased significantly since Covid (see DOEPOPCP Index), they cannot produce more than they currently are in the US. They also have an advantage to European peers as their energy cost is lower so they export whatever they can at a good margin. Recent talks by downstream players also points toward no new capacity coming up in the US given the long term view that ICE are phasing out to leave the place to EV.
I guess you're too polite to mention that the prime motivation of the Biden administration in draining the SPR was to lower gasoline prices prior to the November election. Also, the majority of the oil released from the SPR to date was sour crude which U.S. refineries cannot use in general. So at least some that sour crude is being exported and replaced by sweet crude from the ME and other sources. Sour crude inventories in the SPR are getting very low now so that strategy is about over. It will be interesting to see if the SPR is ever replenished. Personally, I doubt it. Which means it won't be available in a real emergency. Thanks for this thought provoking pieces.
I did say somewhere I think this strategy keeps going until midterms - an inflation reduction policy! One thing I find interesting is that Biden Adminstration has seen its numbers go up, even though the stock market is down, which also makes me think we are moving to a labour over capital era...
I was wondering where the run down in SPR oil reserves was going - which I don't seem to find in crude product export data or European import data for that matter. This article is related to something different - so could you elaborate please?
It shows "Petroleum Products" as a net import of -4,457 for the four weeks ending on Sep. 23, 2022. A year ago this number was -2,354. Total imports is now -1,749 where a year ago it was 1,094 (all figures
in thousands of barrels).
The negative number means the USA is exporting. Hence, the crude released from the SPR is being bought by US refiners, turned into gas or diesel, then shipped overseas, so it never appears in the US inventory levels.
Capitalism is why products are being shipped abroad. The US politicians can jawbone energy producers, in front of the election to a degree, but the flows show that the US is for the time being a net energy exporter.
This also helps explain the strength of the US dollar compared to the last several decades where the USA was a net energy importer....
Hi Chris, I found the data point you are looking at on Bloomberg - DOETNGPL - it is exports of Natural Gas Plant Liquids - which is ethylene, ethane and propane. Exports of all these products have been expanding for years. There was a dip last year, so exports of these products are up alot yoy - but I am pretty sure these products are not related to the run down of inventories at the SPR. These tend to be produced from shale gas condensate, which is why exports have only surged in the last 10 years.
You mention again your liking the TLT-GLD pairs trade. What is your time horizon for this trade? Seems to me that in the very short term they are both oversold 🤔?
I think the data on page 5 is all "Petroleum Products" and would include which you have stated above but also Gas & Diesel.
I can't paste a screenshot, but the data shows Crude imports ending Sep. 23 (4 weeks) at 2,708 (in thousands) and exports at -4,457. Hence, I think you found the "wrong" Bloomberg symbol.
It has been trending down over time, but looks like it went decisively negative this year. Some of this is probably Europe and Australia closing their petroleum refineries. Now they have to buy the products from overseas.
I think you are probably right - but I can't find a data source that really confirms it. Bloomberg give me US distillate and diesel exports, both are up this year, but not breaking out to all time highs - which is what I would expect given the problems in Europe and the run down in SPR.
Long energy shipping particular LNG shippers makes sense to me.
HI Russell,
One reason I think why gasoline and distillate inventories are not growing is that refining capacity has decreased significantly since Covid (see DOEPOPCP Index), they cannot produce more than they currently are in the US. They also have an advantage to European peers as their energy cost is lower so they export whatever they can at a good margin. Recent talks by downstream players also points toward no new capacity coming up in the US given the long term view that ICE are phasing out to leave the place to EV.
Hi Russell,
I guess you're too polite to mention that the prime motivation of the Biden administration in draining the SPR was to lower gasoline prices prior to the November election. Also, the majority of the oil released from the SPR to date was sour crude which U.S. refineries cannot use in general. So at least some that sour crude is being exported and replaced by sweet crude from the ME and other sources. Sour crude inventories in the SPR are getting very low now so that strategy is about over. It will be interesting to see if the SPR is ever replenished. Personally, I doubt it. Which means it won't be available in a real emergency. Thanks for this thought provoking pieces.
I did say somewhere I think this strategy keeps going until midterms - an inflation reduction policy! One thing I find interesting is that Biden Adminstration has seen its numbers go up, even though the stock market is down, which also makes me think we are moving to a labour over capital era...
You should only speak on things you are knowledgeable about. This write up is woefully inaccurate.
https://www.nasdaq.com/articles/america-produces-enough-oil-to-meet-its-needs-so-why-do-we-import-crude
I was wondering where the run down in SPR oil reserves was going - which I don't seem to find in crude product export data or European import data for that matter. This article is related to something different - so could you elaborate please?
Hi Russell,
You are looking at the inventory of US Distillate & Gasoline stocks. That "extra" oil which is being run through the refineries is being exported!
Look at the bottom of page 5 of the weekly petroleum status report:
https://www.eia.gov/petroleum/supply/weekly/pdf/wpsrall.pdf
It shows "Petroleum Products" as a net import of -4,457 for the four weeks ending on Sep. 23, 2022. A year ago this number was -2,354. Total imports is now -1,749 where a year ago it was 1,094 (all figures
in thousands of barrels).
The negative number means the USA is exporting. Hence, the crude released from the SPR is being bought by US refiners, turned into gas or diesel, then shipped overseas, so it never appears in the US inventory levels.
Capitalism is why products are being shipped abroad. The US politicians can jawbone energy producers, in front of the election to a degree, but the flows show that the US is for the time being a net energy exporter.
This also helps explain the strength of the US dollar compared to the last several decades where the USA was a net energy importer....
Cheers,
Chris Ridder, CFA
Thanks Chris. I was looking at the release on Bloomberg and they had no export numbers included there. Will go and redo the numbers
Hi Chris, I found the data point you are looking at on Bloomberg - DOETNGPL - it is exports of Natural Gas Plant Liquids - which is ethylene, ethane and propane. Exports of all these products have been expanding for years. There was a dip last year, so exports of these products are up alot yoy - but I am pretty sure these products are not related to the run down of inventories at the SPR. These tend to be produced from shale gas condensate, which is why exports have only surged in the last 10 years.
Hello from Tokyo,
You mention again your liking the TLT-GLD pairs trade. What is your time horizon for this trade? Seems to me that in the very short term they are both oversold 🤔?
Hi Russell,
I think the data on page 5 is all "Petroleum Products" and would include which you have stated above but also Gas & Diesel.
I can't paste a screenshot, but the data shows Crude imports ending Sep. 23 (4 weeks) at 2,708 (in thousands) and exports at -4,457. Hence, I think you found the "wrong" Bloomberg symbol.
You can look at this data here which gives a breakdown of imports and exports by product: https://www.eia.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm
You can look at a graph of the rise in diesel exports here: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WDIEXUS2&f=W
Gasoline exports here: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPM0F_EEX_NUS-Z00_MBBLD&f=W
All Product exports here: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WRPEXUS2&f=W
Things are not linear but the trend is up!
Hence, one can look at this chart of net imports.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WTTNTUS2&f=W
It has been trending down over time, but looks like it went decisively negative this year. Some of this is probably Europe and Australia closing their petroleum refineries. Now they have to buy the products from overseas.
https://www.abc.net.au/news/2021-02-11/australia-loses-another-oil-refinery-risking-fuel-supply/13139648
https://seekingalpha.com/news/3817028-fuel-shortages-popping-up-in-europe-were-refinery-closures-overdone
Of course you can google other news stories...
However, the brute fact is that Europe & Australia now have to buy more refined petroleum from overseas.
Full disclosure I am long energy shipping
Cheers,
Chris Ridder, CFA
Hey Chris,
I think you are probably right - but I can't find a data source that really confirms it. Bloomberg give me US distillate and diesel exports, both are up this year, but not breaking out to all time highs - which is what I would expect given the problems in Europe and the run down in SPR.
Long energy shipping particular LNG shippers makes sense to me.