Weekly Energy Update (December 14, 2023)

by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA | PDF

(N.B. The Weekly Energy Update is going on indefinite hiatus.  Next year, look for a new report format.)

Crude oil prices are continuing to break down despite OPEC+ efforts to restrain supply.

(Source: Barchart.com)

Commercial crude oil inventories fell 4.3 mb compared to forecasts of a 2.0 mb draw.  The SPR was unchanged, which puts the net draw at 4.3 mb.

In the details, U.S. crude oil production was steady at 13.1 mbpd.  Exports fell 0.4 mbpd, while imports declined 0.6 mbpd.  Refining activity fell 0.3% to 90.2% of capacity.

(Sources: DOE, CIM)

The above chart shows the seasonal pattern for crude oil inventories.  Inventories are below seasonal norms but are following a similar pattern.

Fair value, using commercial inventories and the EUR for independent variables, yields a price of $66.88.  The recent drop in oil prices indicates that the geopolitical risk premium has mostly been priced out of the market.

Since the SPR is being used, to some extent, as a buffer stock, we have constructed oil inventory charts incorporating both the SPR and commercial inventories.

Total stockpiles peaked in 2017 and are now at levels last seen in late 1984.  Using total stocks since 2015, fair value is $90.16.

Market News:

 Geopolitical News:

Alternative Energy/Policy News:

  View PDF