Welcome to the counter-seasonal edition of Oil Markets Daily!
There appears to be a lot of confusion on today's EIA weekly oil storage report, so we wanted to publish this along with our expectations for October for clarity sake.
For starters, EIA did not count ~500 to ~600k b/d of exports last week. The cut-off date for the vessels was on the 26th and 27th of September and for those of you that are aware of the EIA reporting standards, the cut-off time is Friday morning. So if the vessels left on Friday, this may have been counted in the following week instead.
Some of you also asked us questions on the difference in API vs EIA. API gets the same submitted data from participants on Monday, so export data timing varies, hence the divergence. Now for those of you keeping track, API vs. EIA difference last week was ~9 mbbls, or the largest single week positive jump since we started tracking this dating back to 2015.
So it's clear to us this is a timing issue.
Now for the month of October, the US will release SPR, so readers should keep in mind that the total SPR released in October will be around ~5.5 to ~6.2 mbbls.
US crude imports are going to set a new year-to-date low in October while exports remain elevated, creating a counter-seasonal draw pattern in October. How much will October decline by? We have -5 to -16 mbbls right now.
For next week, we are expecting a report of -1.7 mbbls.
Finalized figures get published to HFI Research subscribers on Friday, but this is roughly the figure we are seeing for this week.
Now if EIA did miscount the exports last week, then it will show up in next week's report. The volume that could outpace our estimate will be ~3.5 to ~4.2 mbbls.
So what does a counter-seasonal draw do to US crude storage by Nov. 1?
And again, this sets us up nicely for sub 380 mbbls by year-end.
Track Record So Far
This is our track record year-to-date. We are directionally correct 66.67% of the time with the average difference of 1.7 mbbls since the start of the year. Over the last eight weeks, we've been off an average of 2.11 mbbls.
We made our process improvement on June 14, since then this is our track record:
Source: HFI Research
Again, EIA weekly reports tend to vary depending on timing of exports and imports which swing the balances violently, so it's better to take an average over a period of time to judge the accuracy of the forecast.
Conclusion
Due to low US crude imports and high US crude exports, we expect a counter-seasonal draw in US crude storage for October. Our preliminary figures show -5 to -16 mbbls for October.
A counter-seasonal draw in October will help push US crude storage below ~380 mbbls by year end.
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Disclosure: I am/we are long UWT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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October 03, 2019 at 03:28AM
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