We are getting to really concerning levels….another geopolitical shock in an oil-producing nation that disrupts oil production and the globe has a serious issue
Q2 2022 hedge fund letters, conferences and more
“Davidson” submits:
- US Crude production falls 0.1mil BBL/Day to 11.9mil, Total US Crude Inv declines 5.4mil BBL(0.4mil working inv and 5mil SPR release), US Crude Imports declined 0.9mil BBL/Day(6.3mil BBL/Week) Fudge factor 0.881mil BBL/Day or 6.17mil BBL/Week
- US Gasoline Inv rose 3.5mil BBL, US Refined Prod Export declined from 2wks ago 1.35mil BBL/Day(19mil BBL for period showing up as rising US Refined Prod Inv) US Refinery Input declined 0.3mil BBL/Day
The prime observation is the 2wk decline in US Crude Production from 12.1mil to 11.9mil BBL/Day. Is this a response to persistent SPR releases? Is the US pace of drilling not keeping up with existing well declines? Either is a concern and leaves the US in a deeper deficit once SPR releases end. US Exports of Refined Prod have declined causing a small rise in refined product inventories.
As companies report 2Q and provide forecasts, the trend has reflected expanded economic activity in core manufacturing thus far. The next 3wks will flesh-out a fuller picture. By the commentary, the surge in TSA traffic and series of new aircraft orders, the pace is likely to continue to support economic expansion and demand for crude which we are not producing.
In my estimation a period of higher $WTI is likely making energy issues quite attractive at current levels.
The EIA DUCS report shows DUCS inventory flat and completed wells nearly equal to drilled wells confirming earlier industry commentary that usable DUCS inventory was near ‘bottom-of-barrel’. Drilling in June 2022 slowed a little below the recent trend of 50 month-over-month to 30 wells above May 2022.
All new production will be tied to new drilling going forward. Currently with US crude production holding near 12mil BBL/Day as SPR releases have moved to 7mil BBL/Week and imports making up the rest of demand, the pace of drilling has little incentive to accelerate to increase US production in my opinion.
