The EIA’s data for the week to 26 October was released yesterday, a day later than usual as a result of the disruption caused by Hurricane Sandy. It is unclear to what extent, if any, the completeness of data reporting to the EIA might have been affected, but the hurricane’s actual impact on the numbers is likely to feature in the following week’s data. In that respect, the 0.8mmb/d (-4.2%) plunge in implied all product demand was probably not due to the hurricane. All product demand fell to 18.3mmb/d and below the bottom of the seasonal range, mainly as a result of a 23.2% WoW drop in the volatile ‘other oil products’ category.
In keeping with Shell’s comments on the weakness in global product demand during its conference call yesterday, the
Although crude inventory drew 2.0mmbbl, in contrast to the expected build of 1.8mmbbl, that can almost entirely be explained by a 0.9mmb/d (-10.2%) WoW drop in crude imports to the second lowest import level recorded YTD. However, crude inventory remains above the top of the seasonal range.
We continue to believe that supply is in excess of demand and that, as the North Sea finally comes back to full production, the oversupply position is likely to be exacerbated. Until that oversupply stops, we believe that crude price risk lies to the downside and we note that crude prices do appear to be softening.