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.

i

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

    Grain TV: Corn Exports Tapering Off4-24

    DTN Livestock Close: Spring Rains Trigger New Contract Highs in Feeder Pit4-24

    Doane Cotton Close: Old-Crop Prices Continue Strong4-24

    New Ag Tech Documents, Shares Info from Field, Orchard Analysis4-24

    Crop Insurance: All You Want to Know and More4-24

    DTN Cotton Close: Settles Higher in July, Dec.4-24

    Texas: Insect Scouting School, Amarillo, May 94-24

    Texas: Range and Wildlife Management Field Day, Coryell County, May 64-24

    DTN Grain Close: Wheat Ends Higher, Fewer Canadian Acres Expected4-24

    DTN Livestock Midday: Hogs Lower, Cattle Higher4-24

    AgFax Rice Review: Improved Prospects in CA; India Exports Decline as Thailand’s Increase4-24

    U.S. Grain Transportation: Corn Inspections Remain Strong4-24

    DTN Grain Midday: Wheat Moves 14 to 18 Higher4-24

    Top Considerations When Buying Farm Equipment — DTN4-24

    Trans-Pacific Partnership Talks Between U.S., Japan Bog Down — DTN4-24

    Unmanned Aircraft (UAV) Will Improve Precision Ag Data Collection4-24

    Testing Soil Health on the Farm — DTN4-24

    DTN Cotton Open: Edges Higher in Most-Active July4-24

    U.S. Energy: Typical Seasonal Factors Contribute to Rise in Gas Prices4-24

    Gasoline Prices: Highest Since March 20134-24

    Propane Stocks: Increase by 1.2M Barrels4-24

    Diesel Prices: Average Rises 2 Cents4-24

    DTN Livestock Open: Meat Futures Set for Mixed Start4-24

    DTN Grain Open: Corn Higher in Quiet Trade4-24

    Keith Good: Cattle Prices Moving Up; Porkier Pigs Command Premiums4-24

    AFB Grain-Soybean Close: Mostly Higher Except in Old-Crop Beans4-23

    AFB Cotton Close: Prices Move Lower4-23

    AFB Rice Close: Mostly Lower in Narrow Range4-23

    Cold, Wet Conditions Harmful to Corn Seeds – DTN4-23

    Other Communities Face Risk of AN Fertilizer Explosions – DTN4-23

    Oklahoma’s Bryan County Declared Natural Disaster Area4-23

    Texas Qualifies as Primary Natural Disaster Area4-23

    AgFax Cotton Review: Chinese Policy Affects Global Markets; A History of Production in Arizona4-23

    Family Owned Cotton Mill Closes. You’ll Never Guess the Location.4-23

    Sierra County, New Mexico Added to Natural Disaster List4-23

    Senate Expected to Pass Upcoming Tax-Extenders Bill – DTN (Updated)4-23

    Exploring Key Elements in Succession Planning — DTN4-23

    Welch on Grain: Modest Increase in Planted Corn Acres4-22

    Cotton: Smaller Pima Plantings Expected for 2014/154-22

    Welch on Wheat: Condition Decline Continues4-22

    Mississippi: MSU Extension Marks Its 1st Century4-22

    USDA: Weekly National Peanut Prices4-22

    Ethanol Campaign Ramps Up as EPA Decision Nears – DTN4-22

    Mid-South Ag, Environmental Law Conference Set May 16 in Tunica, Miss.4-22

    AgFax Grain Review: Chinese Rejections Continue; Still Time to Plant Corn4-22

    DTN Fertilizer Trends: Prices Higher for 9th Straight Week4-22

    Pinnacle Acquires Harvey’s Agricultural Solutions4-21

    Livestock: U.S. at Disadvantage in Japan Trade Deal – DTN4-21

    Chemtura AgroSolutions Acquired by Platform Specialty Products4-21

    Indiana: Beck’s Hybrids Expands with $60M Investment4-21

    Wheat Resistance Gene Found Against Stem Rust Pathogen4-21

    Wheat: Study to Develop Climate-Resilient Varieties4-21

    North Carolina Wheat: Head Scab Alert Issued For Eastern Areas4-21

    Good on Grain: How Many Soybean Acres Do We Really Need?4-21

    4 Factors That Have Reshaped Agriculture in Last 10 Years — DTN4-21

    Texas Explosion Prompts Subtle Changes in Fertilizer Industry — DTN4-21

    Flint on Crops: Reniform Nematode Continues to Plague Us4-21

    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