Fundamental Friday: 29 April 2016

Crude oil: Crude oil production posted another decline this past week as energy companies begin to reveal their first quarter earnings. Total output fell 15,000 b/d to a total of 8.938 million b/d, another new low for 2016 and evidence for a waning shale glut. A little over a month ago, estimates were 100,000 b/d higher on March 18th. The losses in output continue to be coupled with growing stocks as another 2 million barrel increase was logged last week. Stocks, now at 1.235 billion barrels. continue to drag on bullish outlooks as an oversupply could still persist long after production reaches a trough. Since the 100,000 b/d decrease in output, stockpiles have grown over 8 million barrels in the same period.

Refinery inputs fell last week by about 250,000 b/d to 15.847 million b/d breaching the 16 million b/d mark that was crossed the week before. Refinery utilization also fell by 1.3 percent. Last week's estimate of 88.1 percent sets a new six-week high after peaking at 91.4 percent at the beginning of the month. A flat trend in refinery crude oil inputs could be the cause of growing stockpiles. According to April averages, refinery inputs grew a measly 0.16% from 2015 to 2016 while stocks added 4.59% in the same period. An increase in crude oil outflows is a must if companies want to see inventories lower.

Crude oil prices continued their bullish rebound this week. The WTI spot price grew over 5% this week closing at $45.99 on Friday. The Brent spot price jumped just under 5% this week to a Friday close of $47.32. Prices could be headed towards $50 a barrel if production continues to fall.

Natural gas: Natural gas rig data continues to move flatly. Just 1 rig went offline last week for a total of 87 still online. For the month of April so far, a loss of 2 rigs has been the net change, a fairly unconvincing downtrend. Although, bearishness still reigns supreme as today's rig count is still 138 lower than a year ago. Underground stocks increased dramatically last week according to the Energy Information Administration. Natural gas stocks grew by 73 bcf to 2557 bcf an enormous addition considering the flat trend that had been evident over the past couple weeks.

Supply and demand changes were estimated to be -0.40% and -1.70% by the Energy Information Administration this week. The trend for both has been relatively flat as well, but stock data hint at more demand lag than is estimated. Suppliers have been cutting operations ever since the above average warm weather has caused demand to decrease significantly. In an EIA report, "average daily production from April 1 through April 23 1.0% lower than average production in March, and a full 2.5% lower than the average production in February." Underground stockpiles will be high for awhile until demand is allowed to flair up again.

With the jump in natural gas stocks, bearishness continued to affect the Henry Hub spot price. Over the past week, losses of -5.6% dropped the price to $2.14 upon Friday's close. Lagging demand and surges in supply could keep prices low for awhile.

Gasoline: The trend in refinery operations has bullishly affected the motor gasoline market. Total stocks of finished gasoline have decreased by 413,000 barrels to 24.412 million barrels due to decreases in refinery capacity. Over the last three weeks, finished gasoline has been below 25 million barrels down from the three weeks before where it was above 26 million. Component stocks grew by 2 million barrels last week to 216.85 million barrels total. The build up can most likely me attributed to less demand from refineries. Finished gasoline production dropped by 231,000 b/d to 9.507 million b/d last week. Product supplied declined 400,000 b/d last week to 19.828 million b/d as estimations for demand declined with refinery capacity.

Gasoline prices continued their climb upwards this week. The average price of regular gasoline across the U.S. jumped $0.025 to $2.162 per gallon. Every region of the U.S. showed price growth based on estimations last week. The average price of diesel gasoline in the United States grew $0.033 to $2.198 per gallon. Once again, gains were recorded across the country in solidarity.