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

    AgFax Grain Review: Diseases Developing Fungicide Resistance; Positive Outlook for Soybeans10-31

    Rice Market: Unexpected Action in Futures This Week10-31

    Rice Crop: Texas 2nd Crop Not Very Promising10-31

    Grain TV: Basis Levels Improve10-31

    AFB Grain-Soybean Close: Wheat Down, Gains in Corn, Soybeans10-31

    AFB Cotton Close: Futures Retrace Wed. Gains10-31

    AFB Rice Close: Futures End on Positive Note10-31

    South Carolina Cotton: Southern Southeastern Annual Meeting, Hilton Head, Jan. 21-2410-31

    Cleveland on Cotton: Goblins Keep Coming – Look for Jan. Rally10-31

    DTN Livestock Close: Short-Covering Boosts Live Hog Futures10-31

    BT Soybeans: MON 87751 Gets Non-Regulated Status by APHIS10-31

    AgFax Rice Review: Drought Hammers Cali. Crop; Surface Ozone Reduces Yields10-31

    Crop Tech: Orange Corn; BT-Soybeans; Frozen Oats – DTN10-31

    Grain Farming Economics Look Grim for 2015 – DTN10-31

    Crop Insurance: 3rd Option for Crop Payment Yield Update10-31

    DTN Cotton Close: Mixed After Late Rally10-31

    Mississippi Wildlife: Responsible Hunting Maintains Future Populations10-31

    DTN Grain Close: Soybean Complex Ends Week Higher10-31

    Mississippi Pecans: Off Year May Impact Holiday Volume10-31

    USDA: Peanut Price Highlights10-31

    Georgia Pecans: Good Demand, Lighter Crop Expected10-31

    Four States Cattle Conference Set Dec. 10 in Texarkana, Ark.10-31

    DTN Livestock Midday: Live Cattle Contracts Shift Lower10-31

    DTN Grain Midday: Corn, Wheat Trading Lower10-31

    AgFax Wildlife Review: Wild Hogs Could Put Scare in Trick-or-Treaters10-31

    DTN Cotton Open: Futures Dip Near Session Low10-31

    DTN Dried Distillers Grain: No Rally in Prices Expected10-31

    DTN Livestock Open: Cattle Contracts to Begin Firm10-31

    North Carolina: Irrigation Conference Slated Nov. 6 in Raleigh10-31

    DTN Grain Open: Soybeans Start Out Higher10-31

    Keith Good: Turkey Investigates U.S. Cotton Imports, Demand May Suffer10-31

    Doane Cotton Close: Strong Exports Continue10-30

    ELS Cotton Competitive Payment Rate Is Zero10-30

    Biodiesel: 2014 A Tough Year for Producers10-30

    Kansas Officials Point Out Flaws in Clean Water Act – DTN10-30

    Future Farmers Face Major Challenges, Ag Sec Tells FFA – DTN10-30

    U.S. Grain Transportation: Barge Rates Remain Well Above Average10-30

    Mississippi: Fall Tests for Nematodes Help Keep Crops Healthy10-30

    California’s SJV Included in Report on Soil Loss Due to Salt Damage10-30

    U.S. Energy: Gas Prices Drop to Lowest Since December 201010-30

    Gasoline Prices: Average Drops 6 Cents10-30

    Propane Stocks: Down 1.3M Barrels10-30

    Diesel Prices: Decrease by 2 Cents10-30

    New Research Study Shows the Value of Neonics10-30

    Texas: Pecos County Pesticide Workshop, Fort Stockton, Nov. 1810-29

    Florida: Sugarcane Field Day, Quincy, Nov. 310-29

    Texas Wildlife: New Deer Management App Just in Time for Deer Season10-29

    Peanut Stocks: Utilization Up 6%, Stocks Total 1.2B Pounds10-29

    Texas Pecans: Fairly Light Deliveries, Good Demand10-29

    Louisiana Pecans: Deliveries Insufficient to Establish Prices10-29

    Georgia: Brooks County Clean Day Rescheduled to Nov. 1210-29

    AgFax Cotton Review: U.S.’s High Quality Offers Market Resilience10-29

    Georgia: USDA Designates Early County Primary Natural Disaster Area10-29

    Why Chinese Consumers Pay More for Non-GMO Soy Oil – DTN10-29

    DTN Fertilizer Outlook: Demand May Fall with Crop Prices10-29

    Grain Math – Can you Pass the Test? – DTN10-29

    Welch on Wheat: Crop Condition Right on Average10-28

    Welch on Grain: Corn Harvest Runs Behind but Conditions Remain High10-28

    USDA: Weekly National Peanut Prices10-28

    Mississippi Wild Hogs: Trapping Is the Best Control Method10-28

    DTN Fertilizer Trends: Stubborn Prices Pose Dilemma for Grain Farmers10-28

    Corn Prices: How Do You Handle a Nervous Market? — DTN10-28

    Georgia Peanuts: Spider Mite Damage Rises in Dry Weather10-28

    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