Capitulation Aplenty
As the article title may suggest, there's a lot of capitulation in the energy world. But before I begin, let's clarify the issue with US crude storage and what we see.
We expected a draw of ~12 million bbls for the week ending Dec 1. EIA reported a draw of 4.6 million bbls. After taking into account refinery throughput and land imports, the import/export mismatch came to a total of ~6.412 million bbls. While the EIA reported -1.417 million b/d in adjustment because of understated crude exports and overstated crude imports, our modified adjustment showed a jump to +916k b/d.
While this may not seem like a big jump, if you include the transfers to crude oil supply (old methodology), the implied adjustment would have been an eye-popping +1.65 million b/d.
As you can see in our modified adjustment table, anytime the modified adjustment got that elevated, it immediately reversed the week after (note: there are a few rare exceptions).
Now looking at our preliminary crude forecast for next week, we are seeing a crude build of ~7 million bbls.
This is because US crude exports typically fall in the first week of the month and crude imports are elevated.
Our theory is that EIA likely counted crude imports for the latter week into this week's report, which materially reduced the real draw. In turn, this means that our forecast of +7.53 million bbls will be too high versus what EIA reports next week. We assume that EIA will report +1 million bbls for next week's crude storage figure.
In essence, readers should note that instead of getting a ~11 million bbl draw followed by a ~7 million bbl build, EIA will have reported -4.6 million bbls followed by a small build in storage.
EIA likely to report...
Versus...
In the end, the result is the same.
Now going forward, we see very elevated US crude exports into year-end, while US crude imports are going to remain steady. We see US commercial crude storage falling below ~425 million bbls by year-end.
Forecast...