Oil (NYMEX:CLF14) demand surges in the U.S. according to the Energy Information Administration (EIA) and the International Energy Agency as low prices spark a buying frenzy. Yet could a budget deal that increases the odds of an early taper temper rising demand expectations? Today we get the EIA report that will have to be compared to the American Petroleum Institute version that reported a drawdown in crude supply as refiners run wild and fog in Houston impacted the movement of supply.
It’s hard to know where to start but the market seemed to get a boost after the EIA released their Short Term Energy Outlook, which showed U.S. demand rising while OPEC production falling. The EIA said that OPEC crude-oil production hit a 2-1/2-year low in November amid output disruptions in Nigeria and Libya. At the same time they say that oil demand growth in the U.S. is at the highest level since 2010. They increased U.S. oil demand 1.1% from a month ago. They at the same time reported that U.S. oil production will be at the highest level in 25 years, not bad.
That demand growth could be seen if you look through the fog and the American Petroleum Institute weekly numbers. Crude oil showed a shocking 7.5 million barrel draw down. While the number was inflated by fog in the Houston Shipping Channel and year-end tax considerations, you can’t dismiss the strong refinery runs.
The API shows refiners are running wild, raising utilization 1.2% to an impressive 92.7%. This led to a 6.3 million barrel build in gasoline supply and a more modest 1.2 million barrel increase in distillate inventory.
Then you had the International Energy Agency weigh in. Bloomberg reported that global oil demand in 2014 will be higher than previously forecast, after consumption in the U.S. rebounded to its strongest level in five years, the International Energy Agency said. The IEA estimated today in its monthly oil market report that demand will increase by 1.2 million barrels a day, or 1.3%, to 92.4 million a day next year, raising its projection from last month by 240,000 a day. U.S. fuel use rose above 20 million barrels a day in November for the first time since 2008, according to preliminary data. While the agency boosted its forecast for the crude volume OPEC will need to supply, “making room” for the potential return of Iranian exports “could be a challenge for other producers” in the group, it said.
Natural gas (NYMEX:NGF14) continues to rock. Winter storms could portend a 88 bcf drawdown this week and perhaps three times that the week after. If it stays cold, gas will stay hot!