The U.S. Petroleum Balance Sheet for the week ending December 22 showed that total stocks declined by a strong 8.7 million barrels:
Domestic Production Declined
Lower 48 oil production declined for the first time in a long time from 9.27 mb/d to 9.25 mb/d:
Although this does not seem to be a significant change, the fact that the U.S. production is expected to save us from the incessant demand growth and production declines elsewhere across the world, deems any decline significant.
Net Imports Surged
Primarily due to lower U.S. crude oil exports, net imports last week surged by 800+ kb/d, or more than 5.6 mb. I expect exports to revert back to 1.8 mb/d in the coming weeks, as the spread between West Texas Intermediate and Brent crude oil prices remain high.
If exports in fact swing back up as I expect, the U.S. oil inventories could continue to decline by nearly 10 mb per week throughout the next three months until U.S. oil production has a chance the react to higher oil prices.
As I recently discussed in Rig Count Is Dead, Or Is It?, rig counts may resume rising in January, leading to higher U.S. oil production in 2Q18. This, however, may be too late to prevent oil prices from rising above $80 before the next summer driving season.
8.7 mb inventory decline in a week is nothing to sneeze at, especially when it's accompanied by weak export figures. Although they increased by more than 35% in just a few months, oil prices fell short of my $70 per barrel estimate for exit-2017, primarily due to stronger than expected U.S. oil production.
On a larger scale, however, global oil inventories continue to decline at an accelerating rate, which could mean $70 per barrel is only delayed by a few weeks. I will report back as further facts become available.
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