EIA Weekly: Refinery Input Surges

by: ValueAnalyst

At last, refinery input recovers from hurricanes and planned maintenance outages in recent months.

As expected, this has led do a recovery in product inventories and a large crude oil draw.

Let's dig in further.

In "The Curious Case Of Refineries," I concluded:

Product inventory levels remain normal in absolute levels and low in terms of days of supply as demand has increased this year. I expect crude oil refinery input to increase back significantly above last year's levels in the coming weeks, and through year-end, leading to continued significant declines in crude oil inventory levels.

Today's EIA weekly showed just that:

Readers should note that crude oil input to refineries continued its surge, pointing to a nearly 800 kb/d, or 5%, jump from the year-ago period. This should be an eye-opening observation to oil bears who were screaming "demand peak!" just nine months ago.

How quickly the facts change for those who are not keeping their eye on the ball.

Other key observations

Domestic production is estimated to rise by 25 kb/d week after week, but, as we know, EIA weekly reports have been less than reliable for this purpose. I'll wait for the monthly EIA-914s to conclude that U.S. production is rising by more than 1.0 mb/d, which I highly doubt at this point.

The adjustment figure has remained high again this week. But, as I explained recently in "Oil: Why The 'Adjustment' Does Not Matter," we should be watching the overall inventory number.

Total stocks (including SPR), my preferred measure, declined by another 5.0 million barrels, which is bullish. I expect this number to continue to be negative between 5 and 10 million barrels each week, and support ongoing global inventory draws. There is more work to be done.

The primary downside risk is the pace of U.S. oil production.

Bottom Line

This was another bullish report, also supported by a large crude oil inventory drop, which is what market participants erroneously watch. I continue to keep my eye on the long-term ball, and expect oil prices to continue above $70 per barrel in the coming weeks.

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