US imports from Opec up 21 per cent

After four weeks of huge builds and draws we finally get a tame number this week with a 2.0m bbl draw in total petroleum stocks. I know other analysts focus primarily on crude stocks, but personally I think the most important number is the change in total petroleum inventories. At the end of the day, what matters most is how much petroleum is burned by consumers compared to how much is pumped out of the ground. Splitting hydrocarbon molecules and moving them from the crude tank to a product tank doesn’t materially affect that equation in most circumstances, and certainly not now with inventories of just about everything well above normal.
With that said, the internals of this report were pretty interesting with a very large 7.4m bbl drop in propane inventories being mostly offset by a 6m bbl increase in gasoline stocks with smaller off movements in the remaining categories. On the consumption front we saw large increases in distillate and other oils offset by a curious decline in gasoline where demand for the week was the lowest in nearly 3 years, and 7.1m bbls below the same week last year.
Total petroleum stocks decreased 2.0M bbls for the week which is the right direction but still a little shy of the rate bulls really need to resume their march towards $60. It’s still a bit early for the  Opec/non-Opec cuts to start hitting US inventories, but in 3-4 weeks we should start seeing a noticeable dip in crude imports from about -53m bbls a week hopefully down to under 50m bbls a week, and total stock draws in the ballpark of 3m-5m bbls a week. It won’t happen overnight but if those pieces fall into place we could start seeing actual year over year declines in petroleum stocks for the first time in two and a half years.
The draw in itself is a little bullish, but not too concerning for the bear case. Imports remain high and we have yet to see any drop off related to the  Opec/non-Opec cuts, not that we really expected them before February (if at all). Looking to other sources, Canadian imports are coming in strong at -3.5m bbls a day which is 200-300 thousand barrels a day higher than this time last year. Add that to the recent gains in US production and it is possible that the  Opec/non-Opec cuts will be too little too late to draw down US inventories at any respectable rate.
Finally, as I have mentioned in the past I continue to keep an eye on consumption, especially gasoline. The chart above shows the trailing 52 week average daily consumption rate peaking the first week of October 2016 and slowly falling since then. It’s not a big number, down just 0.5 per cent, but it’s going on 4 months and it seems to be accelerating.
If you were expecting 2-3 per cent growth in 2017 this trend could undercut your full year gasoline consumption number by about 100m bbls. It’s a bit early for the bears to get overly excited, but boomers are retiring, vehicles are getting more efficient, and the younger generation seems much less interested in driving, so this is definitely a trend worth keeping an eye on.
This was a neutral report with the slightly bullish inventory decline being offset by bearish imports , solid domestic production, and general weakness in gasoline consumption. Oil seems fairly valued at -$51 and nothing in this report materially changes that for me. For the next 3-4 reports, all eyes should be on  Opec.
They promised cuts on Jan 1, 2017, and continue to assure everyone they are for real. Transporting oil takes time, so if they are for real, we should see the cuts sometime in February. It’s a bit early, but I put together a new chart to show where  Opec Imports are compared to the 2016 average.
The 2016 numbers are the average daily imports of crude from the listed  Opec countries for the full year. The 2017 values are the daily average of the two weekly reports we have had so far. Clearly,  Opec did not decide to get an early start on cutting exports to the US, with the 2017 total currently 557k bbl/day higher than the 2016 rate. [Scott Anderson – Seeking Alpha]