Wednesday, September 25, 2013
150px_-oil_refinery_shutterstock

U.S. Energy: Understanding the “Change of the Stock Change”

AgFax.Com - Your Online Ag News Source


While avid college football fans eagerly await the Tuesday morning update of team rankings, crude oil and petroleum product market watchers often focus on the Wednesday morning release of the U.S. Energy Information Administration’s (EIA) Weekly Petroleum Status Report (WPSR).

Although the WPSR provides comprehensive details about U.S. crude oil and key petroleum products covering all sectors of the primary supply chain, many analysts often focus exclusively on the crude oil inventory change data point, using falling or rising crude stocks as an indicator of the relative tightness or looseness of crude oil markets. As a result, the release of weekly crude oil stocks data sometimes has a noticeable impact on crude oil price formation, so it is important to understand how to assess the weekly change in stocks, also known as the “change in the stock change,” within the context of the weekly supply-demand balance.




EIA collects weekly data on gross imports of crude and petroleum products, crude and product inventories and refinery crude runs. EIA estimates weekly U.S. crude production and crude oil and petroleum product exports.

The weekly U.S. crude balance shows how crude oil consumption, represented by refinery runs, is supplied by domestic crude production and net crude imports. If these crude supply sources exceed refinery consumption for a week, any extra barrels go into storage, causing crude inventories to rise. If crude production and net imports are less than what refineries require for a given week, inventories are drawn down to meet their input requirements and maintain market balance (Figure 1).

click to enlarge

Click Image to Enlarge

As a simplified example, assume the United States produces 7 million barrels per day (bbl/d) of crude oil while net crude oil imports are 8 million bbl/d, making available supplies from these sources total 15 million bbl/d. At the same time, if refinery demand for crude oil during the week is 16 million bbl/d, the 1 million bbl/d (7 million barrels for the week) supply shortfall would need to be met by drawing down inventories (Figure 2). Another way of stating this is that given the volume of imports and domestic production that week, crude oil inventories needed to be drawn down by 1 million barrels per day (7 million total for the week) in order to balance refinery demand that week with available crude oil supplies.

click to enlarge

Click Image to Enlarge

To fully appreciate the non-intuitive but key impact of how the “change of the change” in stock levels affects weekly crude oil balances, one needs to consider how much stocks changed in the prior week in order to properly analyze the current week’s change in stocks that is required to balance the crude market. When done this way, the impact of the change of the stock change becomes clear.

Using the example from above, which requires stocks to fall by 1 million bbl/d, assume that the following week (Week 2) refinery crude runs remain at 16 million bbl/d, domestic crude oil production remains at 7 million bbl/d, while net crude imports rise by 700,000 bbl/d and now total 8.7 million bbl/d (Figure 3). Crude supply (production plus net imports) is now 15.7 million bbl/d, which is still 300,000 bbl/d less than refinery runs. Thus, even though net imports increased by 700,000 bbl/d in week 2, crude stocks will still need to fall by 300,000 bbl/d, or roughly 2 million barrels for the week, in order to balance the market.

click to enlarge

Click Image to Enlarge

The change of the change in stocks reflects the weekly increase in import volumes by showing a much smaller decline in crude inventories than the prior week, but the supply-demand balance still requires a draw in stocks to satisfy weekly refinery input demand in this example. Casual observers are often puzzled by a weekly stock draw during a week when crude imports have risen, which is why understanding the change in the stock change is crucial to properly analyzing weekly petroleum supply and consumption data.

Full report.


Tags: , , , ,


Leave a Reply

Name and Email Address are required fields. Your email will not be published or shared with third parties.

Sunbelt Ag News

    DTN Livestock Midday: Strong Gains Flood into Markets9-2

    National Corn Growers Association Names New CEO — DTN9-2

    DTN Grain Midday: Wheat Trade 7 to 13 Lower9-2

    Brazil Soybean Exports Decline in August — DTN9-2

    DTN Cotton Open: Tumbles to Five-Session Low9-2

    South Carolina: Crop Production Field Day Set Sept. 25 at Blackville9-2

    DTN Livestock Open: Cattle Futures Starting with Firm Undertone9-2

    DTN Grain Open: Higher on Light Buying Interest9-2

    Keith Good: Rail Service Problems Persist; Hog Prices Rebounding9-2

    Texas Cotton Industry Mourns The Death Of Economist Carl Anderson9-1

    Livestock: Market Lessons from 4-H County Fairs – DTN9-1

    China Cotton: Reserves’ Quantity, Quality Cause Problems – DTN9-1

    Welch on Wheat: Spring Wheat Harvest Running 22% Behind9-1

    Welch on Grain: Corn Condition Improves, Well Above Average9-1

    Flint on Crops: Rain Is Better Than Well Water9-1

    Rose on Cotton: Plenty of Gaps and No Rallies Expected8-29

    Peanut Harvest In N. Fla.; Drought Pushes Digging In Lower SE – AgFax8-29

    Rice Crop: Looking for a Normal Crop, Not a Bumper8-29

    Rice Market: Being Short Tricky but Being Long Takes Patience8-29

    Peanut Stocks and Processing: Utilization Up 2%, Stocks at 1.9B lbs8-29

    Cleveland on Cotton: Chinese Demand Pulling Prices Higher8-29

    DTN Livestock Close: Cattle Futures Sharply Higher on Positive Cash News8-29

    Doane Cotton Close: Futures Unable to Recover Losses8-29

    DTN Cotton Close: Late Rally Leaves Dec. Flat8-29

    AFB Grain-Soybean Close: Modest Losses Across the Board8-29

    AFB Cotton Close: Dec. Moves Fractionally Lower8-29

    AFB Rice Close: Futures Chart New Leg Down8-29

    Farm Bill: Cotton Transition Assistance Enrollment Now Open8-29

    Are USDA Corn Yield Forecasts Getting Better or Worse Over Time?8-29

    DTN Grain Close: Markets Settle Lower Ahead of 3 Day Weekend8-29

    USDA: Peanut Price Highlights8-29

    Farmers with Foreign Assets Face New IRS Rules and Serious Penalties8-29

    Mississippi Outdoors: Beaver Management Not a Simple Issue8-29

    Arkansas: Flood Damage to Crops Valued at $35.6M8-29

    Delta Soybean Yields Start Strong; Sugarcane Aphid Marches On – AgFax8-29

    California: Pinnacle Announces Acquisition of Kerman Ag Resources8-29

    Midwest Farm Lenders Expect Solid Output; Lower Farm Income – Federal Reserve8-29

    Farm Payments to Stakeholders Rise as Gov. Payments Decline – USDA8-29

    Young Farmer in Your Future? – Helping Him or Her is Key to Success. – DTN8-29

    Net Farm Income Forecast to Fall,10.6% Decline Crop Value – USDA8-29

    Alabama: Pesticide Clean Days, Sept. 3-48-28

    Oklahoma: Fall Cotton Tour, Hydro, Sept. 118-28

    Rice Harvest Eases Into Gear In Midsouth – AgFax8-28

    Farm Drones Under Scrutiny: Farmers Impatient for FAA Ruling – DTN8-28

    USDA Readies Dairy Program, Producers Able to Sign Up Tuesday – DTN8-28

    U.S. Grain Transportation: Inspections Continue to Increase8-28

    Farm Program Decisions Hinge on Uncertain 2014 Crop Prices8-28

    Raindrops Keep Falling on Heads of Many Midwest Farmers — DTN8-28

    Economist: Big Potential in China for U.S. Corn, Livestock Exports8-28

    John Deere Lays Off 460 from Waterloo, Iowa Factory8-28

    U.S. Energy: Retail Gas Prices Follow Crude Prices Lower8-28

    Gasoline Prices: Decline by 2 Cents8-28

    Propane Stocks: Up to 74.7M Barrels8-28

    Diesel Prices: Average Drops a Penny8-28

    Sugarcane Aphid In Grain Sorghum: Florida, Georgia Find Infestations8-27

    Cotton – Midsouth – Bolls Opening, Early Defoliation Nears – AgFax8-27

    Midwest Corn and Soybeans Need Warm, Clear September – AgFax8-27

    Cotton – Southeast – More Open Bolls, Lingering Pests – AgFax8-27

    Farm Groups Map Waters to Block Clean Water Act Changes – DTN8-27

    Texas: 2 More Counties Make Natural Disaster List8-27

    Southwest May Face ‘Megadrought’ This Century, Say Scientists8-27

    China’s Citizenship Reform Should Benefit Farmers — DTN8-27

    What Can We Learn about Corn, Soybean Yields from Crop Tours?8-27

    Consider Sulfur for Your Fertility Plans This Fall — DTN8-27

    Rough Rice: Stocks Down 13 Percent from August 2013 — USDA8-27

    Sunbelt Ag Events

     

    About Us

    AgFax.Com covers agricultural trends and production topics, with an emphasis on news about cotton, rice, peanuts, corn, soybeans, wheat and tree crops, including almonds, pecans, walnuts and pistachios.

      

    This site also serves as the on-line presence of electronic crop and pest reports published by AgFax Media LLC (formerly Looking South Communications).

        

    Click here to subscribe to our free reports.

      

    We provide early warnings and confirmations about pests, diseases and other factors that influence yield. Our goal is to quickly provide farmers and crop advisors with information needed to make better and more profitable decisions.

         

    Our free weekly crop and pest advisories include:

    • AgFax Midsouth Cotton, covering cotton production and news in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Missouri.

    • AgFax Southeast Cotton, covering cotton production and news in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia.

    • AgFax Southwest Cotton (new for 2013!), covering cotton production and news in Texas, Oklahoma, Kansas and New Mexico.

    • AgFax West (formerly MiteFax: SJV Cotton), covering California cotton, alfalfa, tomatoes and other non-permanent crops in California's Central Valley.

    • AgFax Rice covering rice production and news in Arkansas, Louisiana, Mississippi, Missouri and Texas.

    • AgFax Peanuts, covering peanut production in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas and Virginia.

    • AgFax Southern Grain: covering soybeans, corn, milo and small grains in Southern states.

    • AgFax Almonds, covering almonds, pistachios, walnuts and other tree crops in California's Central Valley.

    • AgCom 101, providing guidance to ag professionals involved in social media.

    Our newsletters are sponsored by the following companies: FMC Corporation Chemtura Dow AgroSciences.

          

    Mission statement:

    Make it as easy as possible for our community of readers to find and/or receive needed information.

              

    Contact Information:

    AgFax Media. LLC

    142 Westlake Drive Brandon, MS 39047

    601-992-9488 Office 601-992-3503 Fax

    Owen Taylor Debra L. Ferguson Laurie Courtney

          

    Circulation Questions?

    Contact Laurie Courtney