Going beyond the barrels: A deep dive into the crude outlook for 2024

The energy landscape is ever-changing, and staying abreast of the latest data is crucial for investors and industry stakeholders. In this comprehensive analysis, we will scrutinize the recent U.S. Energy Information Administration (EIA) data on crude oil, drawing comparisons between the past week and the current week. Additionally, we’ll explore other pertinent updates shaping the crude oil market.

Crude Oil Refinery Inputs and Production: 

The data reveals a notable increase in U.S. crude oil refinery inputs, averaging 16.5 million barrels per day in the week ending December 15, 2023. This marks a substantial uptick of 403 thousand barrels per day from the previous week. This build could indicate lower-than-anticipated refinery runs or weaker-than-projected demand. Refineries operated at an impressive 92.4% of their operable capacity during this period. Gasoline production also saw an upswing, reaching 10.0 million barrels per day. However, distillate fuel production experienced a slight dip, averaging 4.9 million barrels per day.

Comparing this to the past week’s figures, refinery inputs were slightly lower at 16.1 million barrels per day, with refineries operating at 90.2% of capacity. Gasoline production was at 9.5 million barrels per day, while distillate fuel production was marginally higher at 5 million barrels per day.

Crude Oil Imports and Inventories: 

U.S. crude oil imports demonstrated an increase, averaging 6.8 million barrels per day in the current week—an uptick of 233 thousand barrels per day from the prior week. Over the past four weeks, crude oil imports averaged about 6.7 million barrels per day, reflecting a 7.6% increase compared to the same period last year.

Crude oil inventories, excluding those in the Strategic Petroleum Reserve, grew by 2.9 million barrels from the previous week, totalling 443.7 million barrels. While this represents a 1% decrease compared to the five-year average, it signals a notable build.

In contrast, the past week saw a decrease in crude oil imports to 6.5 million barrels per day, down by 1.0 million barrels per day from the week before. Crude oil inventories decreased by 4.3 million barrels, settling at 440.8 million barrels, which is about 2% below the five-year average.

Other Updates 

Beyond the EIA data, a swirl of updates further shapes the crude outlook. Here are some key points to consider:

1. Red Sea Tensions: The ongoing conflict between Israel and Hamas, with its potential to disrupt shipping through the Suez Canal, remains a wildcard factor in the supply equation.
2. Ceasefire Talks and Dollar Dynamics: Talks aimed at a potential ceasefire in the Israel-Hamas conflict could ease supply concerns, while a strengthening dollar could exert downward pressure on crude prices.
3. European Inflation Cools: Lower-than-expected inflation data in Europe raises hopes for potential interest rate cuts by the European Central Bank, potentially boosting economic activity and, consequently, crude demand.

A Cautiously Optimistic Outlook: 

In conclusion, the current data reflects a dynamic crude oil market characterized by fluctuating inputs, production, inventories., and a volatile geopolitical landscape. While concerns about oversupply and a strong dollar might cast a shadow, potential ceasefire talks and cooling European inflation offer glimmers of hope. Overall, a cautiously optimistic outlook seems plausible, with price fluctuations likely to remain within a range until definitive trends emerge.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.