The API Reported Inventory Builds Across The Board Last Week, Typical of the Holiday Hangover Effect

Energy markets are ticking up about 1% to start Wednesday’s trading after a lackluster Tuesday session, shrugging off some bearish fundamental data in the early going.

Reports that the US is considering more sanctions on Russia are getting credit for the early tick higher although details are scarce at this point. That news comes in addition to the new sanctions announced last week against Iran, both aimed at reducing the amount of oil those countries can export via the “Shadow Fleet”.

November’s CPI report came in at .3% for the month and 2.7% for the year, in line with published expectations. Energy prices once again were the major lid on inflation in the US, with gasoline prices down 8.1% and diesel prices down 19.5% year on year, with the total “core” inflation (which excludes food and energy) up 3.3% annually.

The EIA’s Short Term Energy Outlook was largely unchanged from the November report, with expectations for modest economic growth in the US and abroad not keeping pace with oil production which should keep a lid on prices next year. The agency’s hired help (S&P Global) predicts that US oil imports will decline next year to their lowest level in more than 50 years, as domestic production sets a new record high, and refinery runs dip with multiple facility closures already announced. The forecast offered little in the way of refined product news, with only a mention of expectations for a modest decline in Jet fuel inventories next year and noting that this winter will be colder than last year, but still warmer than the 10-year average which will have some modest impacts on distillates.

OPEC revised its global oil demand growth forecast slightly lower for another month in its monthly oil market report, despite optimism for the global economy next year. The cartel also predicted a slight increase in global oil output in 2025 vs last month’s report with the US and Canada continuing to be the main drivers of production growth. The report highlighted a sharp drop in tanker rates forth both clean (refined products) and dirty (crude) vessels. In particular, the rates for shipping from the US to Europe dropped 25% during the month, while shipments from the Caribbean to the US East Coast dropped 34% as vessel capacity far outpaced demand.

OPEC’s output ticked up by 104mb/day during November, with increased output from Libya and Iran offsetting small declines from Iraq, Kuwait and Saudi Arabia. In the “Friends” category of OPEC & Friends (referred to as DoC) production increased by 219mb/day during the month with Kazakhstan’s recovering output after months of pipeline repairs accounting for essentially all of the increase.

The API reported inventory builds across the board last week, typical of the holiday hangover effect. Gasoline stocks were estimated to have increased by 2.8 million barrels on the week, while distillates were up 2.5 million barrels and crude inventories increased by ½ million barrels. The DOE’s weekly report is due out at its normal time this morning. Earlier this morning the DOE (EIA) highlighted how improving well productivity is allowing the US to reach record production levels despite a major reduction in the active rig count over the past few years.

Didn’t stand a Chance. Braya Renewables confirmed Monday that it’s considering shutting down its renewable refinery in Come By Chance Canada after just starting up production in February, due to weak economics, particularly with the upcoming expiration of the $1/gallon US blender’s tax credit that ends 12/31. While logically you may think that reduction in RD output might impact the supplies of the East Coast, in fact essentially all of that production was heading to California on a long-slow diesel-burning journey through the Panama Canal since that facility apparently required all of the BTC, RIN and LCFS subsidies in order to make ends meet.