Daniel Jones: Oil: Looking Better... With Some Exceptions (谈股论金)  511次阅读

作者: xiaosan , 发表于: 2017-05-29 (2725天前) @ 新东

Summary

In this article, I decided to look at some recent oil-related data, courtesy of the EIA.

What I found was that crude stocks continue to fall and some other data coming in is encouraging.

Sadly, some unappealing data seems to be offsetting this to some degree but, in time, new data will arise that will show us what, precisely, is happening.

Over the past week, some interesting oil-related developments have arisen. In particular, we've seen US inventory, demand, and production figures come out, a rig count update, and some news from OPEC. In what follows, I will dig into the data provided and give my thoughts on what it means for investors in companies like Whiting Petroleum (NYSE:WLL), Chesapeake Energy Corp. (NYSE:CHK), Approach Resources (NASDAQ:AREX), and Legacy Reserves (NASDAQ:LGCY), as well as for the United States Oil ETF (NYSEARCA:USO) and other oil-related ETFs moving forward.

Inventories fell nicely

According to the EIA (Energy Information Administration), the picture for crude stocks came in rather bullish. If their estimates are correct, crude inventories for the week came in at 516.3 million barrels. This represents a sizable drop of 4.5 million barrels, which is far larger than the 1.5 million barrel decline estimated by the API (American Petroleum Institute) and happens to be much larger than the 2 million barrel decline forecasted by analysts. It should be mentioned that this drop came about despite a 0.4 million barrel decline in the SPR (Strategic Petroleum Reserve). In the graph above, you can see the trend that stocks have taken over the past 52 weeks and in the graph below, you cna see the same data but zoomed-in on so that the weekly fluctuations are clearer.

What's exciting about this data is that crude stocks weren't the only category to post an improvement. Take, for instance, motor gasoline. Stocks during the week declined by 0.8 million barrels, falling to 239.9 million barrels. Distillate fuel stocks managed to drop by 0.5 million barrels down to 146.3 million barrels, while fuel ethanol stocks declined by 0.7 million barrels to 22.7 million. Residual fuel stocks posted the largest non-crude drop, falling by 1 million barrels down to 38.8 million.

Sadly, though, some categories offset these. Kerosene-type jet fuel stocks rose by 0.5 million barrels to 43.4 million barrels and propane/propylene stocks popped higher by 1.5 million barrels, climbing from 42.2 million barrels to 43.7 million barrels. The largest mover, though, was the "Other" category of petroleum products. If the EIA is accurate, stocks rose by 2 million barrels to 285.1 million barrels. Even with this worsening, though, total crude plus petroleum product inventories dropped by 3.5 million barrels, declining from 1.3397 billion barrels down to 1.3362 billion barrels.

Some encouraging data and some more of the same

Besides inventory data, the EIA also reported estimated weekly production figures for the US. If their numbers are right, domestic oil production came in at 9.320 million barrels per day, an increase of 15 thousand barrels per day (or 105 thousand barrels for the week) compared to the 9.305 million barrels per day seen a week earlier. It should be noted that Lower 48 oil production rose by 20 thousand barrels per day, with the difference coming from a drop in Alaskan output. In the graph above, you can see the trend that production has taken over the past 52 weeks and in the graph below, you can see the same data but zoomed-in on so that the weekly fluctuations are clearer.

Even though this represents some more of the same, some interesting developments did occur. During the week, motor gasoline demand came in strong, averaging 9.704 million barrels per day. This represents an increase of 2% over the 9.516 million barrels per day seen last year and suggests that demand may be strengthening at last. However, the four-week average is still down 1.9% year-over-year at 9.430 million barrels per day. Using the four-week average, distillate demand has also shown signs of improvement, coming in at 4.242 million barrels per day, up 3.6% year-over-year.

Another increase in the rig count

Also during the week, we did see one bad piece of news regarding the oil rig count. According to Baker Hughes (NYSE:BHI), the US oil rig count rose by 2 units to 722. Though this increase isn't large, the year-over-year increase from the 316 units in operation in 2016 is rather significant. Meanwhile, in Canada, the oil rig count rose by 4 units to 40. This represents an increase over the 14 units operating up north the same week a year earlier.

What's helping to perpetuate the glut

From what I've seen, the oil situation is improving rather nicely, but investors are right by saying that there are some hangups we need to contend with. One of them, for sure, is rising US production, but another is the increase in imports from OPEC into the US. If you look briefly at the graph below, you may think that I'm crazy, that monthly figures look down compared to many years in the past.

*Taken from the EIA

Surely, you would be correct in this assumption, but what about when we look over a shorter period of time? Take, for instance, the graph below. In it, you can see that US imports of OPEC oil production decreased (though in a bumpy fashion) from 2012 through 2015. This only looks at the most recent month available according to the EIA. However, in 2016, we saw imports surge from 78.24 million barrels in February of 2015 to 93.10 million barrels. Figures for February of 2017 came out to 96.47 million barrels, despite the absence of an extra day for the leap year. As a note, January numbers show a similar trend.

What's interesting about this is that this has come despite a drop, relative to WTI prices, in the OPEC Reference Basket. If you look at the graph below, for instance, you'll see that the ratio of WTI to OPEC in the first quarter of 2017 came out to 0.995. This represents a decrease from the 1.109 ratio seen a year earlier. If anything, we should see this have a negative impact oil imports, but it has not.

This suggests that, while OPEC has cut back on production materially, the demand for imported crude is still quite high. If this kind of trend persists, it could pose a problem but with Saudi Arabia guaranteeing that its own crude exports will fall in June of this year compared to May, the picture could be about to turn around. However, due to a time lag in reporting, we will need to wait a few months to see the end result here.

Takeaway

Based on the data provided, it's clear that there are some areas of improvement to be had regarding the oil picture, but this week's report, combined with other non-EIA data (excluding the rig count), is certainly bullish and shows that stocks are declining nicely at the moment. Yes, we do still have a long way to go, but I believe that the oil recovery is here to stay and is unlikely to worsen materially for the foreseeable future.

Disclosure: I am/we are long LGCY, AREX, WLL.

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.

Additional disclosure: I own LGCYO and LGCY