Where are U.S Refineries Concentrated?

Of the more than 17.3 million barrels per day (bbl/d) of refinery capacity located in the United States as of January 1, 2012, about 44% (or nearly 7.7 million bbl/d) is located along the Gulf Coast. As the map below indicates, there are a number of refineries, some of them very large, situated along the coasts of Texas, Louisiana, Mississippi, and Alabama.

The U.S. Energy Information Administration's annual Refinery Capacity Report provides capacity information about individual refineries as of January 1 each year. The report identifies refineries that are operable at the beginning of each year. Operable refineries are further classified as either operating or idle. A refinery could be idle for a number of reasons including routine maintenance, unplanned maintenance, or market conditions.

The Refinery Capacity Report also identifies refineries that were new, reactivated, or shut down in the previous calendar year, as well as refineries that were sold in the previous calendar year. The report includes detailed information about the atmospheric crude oil distillation capacity at each refinery and the capacities for several important downstream refinery units that are used to process the products coming from the atmospheric crude oil distillation unit for further processing.

Many refineries are located close to crude oil production centers such as the Gulf Coast (which has significant volumes of crude oil produced both onshore and offshore); near destinations for importing crude oil; or near major population centers where much of the refineries' output will be needed (e.g., California and the areas near Philadelphia, New York City, and Chicago).

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CME Crude Oil, Natural Gas and Gold Report for Friday July 13th

August crude oil prices established a higher high during the initial morning hours, helped by a rebound in risk taking sentiment in the wake of an as expected Chinese GDP report. While China's second quarter growth slowed to a pace not seen in three years, the reading appeared to inspire greater speculation for more economic stimulus. That is seen as a force bolstering the demand prospects for crude oil. The market also appears to be supported by reports of tighter North Sea supplies and greater US sanctions against Iran.

August natural gas prices traded in a tight overnight range as they consolidated yesterday's upside reversal action. This came after the market soldoff in reaction to yesterdays EIA storage data that showed a slightly larger than expected injection of 33 bcf. Total storage stands at 3,135 bcf or 19.7% above the 5 year average. Over the last four weeks natural gas storage has increased 191 bcf. Some traders viewed the EIA storage data as a positive because the weekly injection was about one third of the longer term average injection for this week of the year.

Gold traded nearly flat, but remained on course for a second consecutive week of losses as worries about the euro zone debt crisis and the absence of stimulus measures in the United States buoyed the dollar and its safe haven appeal. Spot gold was little changed at $1,570.14 an ounce, heading for a weekly decline of 0.8 percent.

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CME Group Crude Oil, Natural Gas and Gold Market Recap for Tuesday July 10th

August crude oil prices trended lower throughout the session marking the lows of the day into the pit close. Early pressure in the crude oil market came from a resolution to the oil workers' strike in Norway and from weaker than expected Chinese oil import data for the month of June. The global oil demand story came under greater scrutiny following the EIA's monthly report that showed another downward revision in 2012 global oil demand. The agency sited lower economic growth forecasts. Another source of weakness in the crude oil market came from an afternoon sell off in US equity markets and gains in the US dollar. Expectations for this week's EIA crude oil stocks report are for a draw in the range of 1.25 to 1.50 million barrels.

Natural gas remains on a bit of a roller coaster ride... big decline on Friday, strong recovery on Monday and yet another sell off today. This type of trading action is very indicative of a market forming a top as well as a market that is laden with uncertainty. The main uncertainty that continues to hover over this market is will the rest of the summer weather result in enough cooling related demand to prevent the industry from hitting storage capacity limitations prematurely.

The EIA in the latest forecast (see below for the main highlights) is projecting inventory at the end of October to hit a record high of 4 TCF. With maximum storage capacity of just 4.1 TCF (EIA numbers) that leaves just 100 BCF storage space available for injections during the month of November... which are common...especially if winter type weather gets a late start. This also assumes that storage capacity is equally distributed in all three regions...which it is not. We could hit capacity limitation in the Producing region well before other regions.

The other issue overhanging this market is what will be the strategy of the utility sector in how much coal versus Nat Gas they consume for power generation. At current prices the economics are favorable to coal and I would expect utilities to burn more coal in lieu of Nat Gas and unless the Nat Gas price falls back to below the $2.70 to $2.75 level this move back to coal will continue. If so hitting record high inventory levels could then occur earlier than the EIA projection of the end of October.

After an early attempt to rally gold prices fell back and in the process the August gold fell back to this week's lows. Adverse currency market action, a noted reversal in equities and selling in a number of physical commodity markets seemed to leave gold in a patently bearish posture. Surprisingly gold was initially lifted on hopes for favorable progression in the Euro zone debt crisis but that story line ultimately seemed to be responsible for the washout in gold prices. In retrospect, seeing evidence of added weakness in the Chinese economy, in the wake of the Chinese trade deficit released seemed to spark fears that more serious slowing was in the offing before the Chinese begin to pull out the really aggressive stimulus guns.


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CME Group Energy Market Report Recap for July 4th

Is the SP 500 Closing in on a Top?

August crude oil prices traded sharply higher during the US session and climbed to their highest level since May 31st. There were a number of supportive features supporting the advance including, hopes that global central bankers might offer up more stimulus to bolster growth, mounting tensions in Iran and reduced North Sea output. Reports earlier that Iran had successfully test fired mid range missiles was seen contributing to the fear premium in the crude oil market, by raising the threat of supply disruptions.

This comes along with talk that lawmakers were working toward a bill to block oil tanker traffic through the Straits of Hormuz. The oil workers strike in Norway continues and has reduced North Sea production by around 250,000 barrels per day. Further support for the crude oil market might have come on expectations that this week's EIA crude stocks report will show a draw in the range of 2.25 to 2.5 million barrels, which is a bit larger than the five year average draw for this week of the year of 1.1 million barrels.

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New Pipeline Project Could Lower Natural Gas Transportation Costs to New York City

Future natural gas transportation costs to New York City could be reduced with the expansion of the existing Texas Eastern Transmission pipeline from Linden, New Jersey to Manhattan, New York (see map above). On May 22, 2012, the Federal Energy Regulatory Commission (FERC), the main jurisdictional authority over the construction of interstate natural gas pipelines in the United States, approved an 800,000 million British thermal unit (MMBtu) per day, or 800,000 dekatherms per day, expansion of the pipeline.

This project is slated to begin service in November 2013 and represents one of the biggest transportation service expansions in the Northeast during the past two decades. The project could have the following effects on the New York City market: reduce reliance on oil fired generators, enhance the reliability of natural gas supplies, and lower transportation costs especially in the winter. Spectra Energy secured firm transportation agreements for this expansion with these customers: Consolidated Edison (170,000 MMBtu per day); Chesapeake Energy Marketing, Inc. (425,250 MMBtu per day); and Statoil Natural Gas LLC (204,750 MMBtu per day).

         

Read the entire post at EIA.com

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Natural Gas Steals The Headlines on EIA Injection Report

Today's story in Nat Gas is all about the weekly EIA injection report which came in below all of the market expectations today sending the market into an instant short covering rally that is still underway as of this writing. The inventory injection was below the market consensus as well as below last year and the five year average for the same week.

So far the weekly injections have underperformed for the entire injection season so far. This pattern will have to continue to avoid storage from hitting maximum capacity limitations before the end of the injection season (normally around the end of November to early December). Keep in mind in the short term the market will have limited upside as rising prices will eliminate the economic advantage of Nat Gas over coal for power generation.

This switching has contributed strongly to injections underperforming for the last three months. I still view this market as trading most of the time in the $2.25 to $2.50/mmbtu trading range.

Today's EIA report was bullish from the perspective that the injection was below the consensus level and bullish when compared to last year and the five year average injection level for the same week. The EIA injection was 7 BCF below the consensus (74 BCF) and below last year's injection and below the injection level for the five year average for the same week.

The net injection of 67 BCF was less than my model forecast (70 BCF) this week and at the very low end of the range of market projections. The inventory surplus narrowed modestly versus both last year and the more normal five year average also. The current inventory level is now 666 BCF above the five year average.

Video

CNBC's Sharon Epperson discusses todays spike in natural gas prices and the day's activity in the commodities markets and looks at where crude oil and precious metals are likely headed tomorrow.

CME: Crude Oil Steady Ahead of EIA Inventory Report

Crude oil prices have been steady over the last twenty four hours after a short covering rally driven by a recovery in the euro and equity markets in Europe and the US after Monday's post Spanish bailout sell off. We are now entering the major event period for the month of June with the OPEC meeting kicking off tomorrow and the Greek elections on Sunday. Also since yesterday the EIA, IEA and OPEC have all released their oil forecasts while today the EIA will release its weekly oil inventory report. Last night the API data showed a surprise build in crude oil and decline in gasoline stocks (see below for more details on all of the fundamental reports.

I am still expecting a rollover with no production cuts from the OPEC meeting. I am still of the view that the Saudi's will keep oil production high even if oil prices continue to decline. I believe part of the strategy is to add pressure on Iran with lower oil prices and thus hope that it motivates Iran and the West to eventually negotiate a deal over Iran's nuclear issues. The next Iran/West meeting is in Moscow early next week.

At the moment most risk asset markets are still in a downtrend even after a short covering rally yesterday. The technicals for all of the markets are also suggesting lower values going forward. However, event risk will take over as the main price driver for all of the risk asset markets including the oil complex as the macro correlations remain very tightly linked. I believe there is a lot of trading and investing dollars sitting on the sidelines which is likely to remain parked in bonds and money markets until more clarity emerges from the major market headwinds. Following are just some of the main questions clouding all of the markets

Who will win the Greek elections?

Will the Spanish bank bailout actually go forward?

Is Italy next on the agenda?

Will the EU move to eurobonds?

Will contagion spread around to other EU countries as well as outside the EU?

Will the EU slip back into recession?

Will the US economy continue to slow?

Will China's easing result in a growth spurt for this meteoric economy?

Will the US Fed announce another quantitative easing program at their June meeting?

What will be the outcome of the OPEC meeting...production cut or status quo?

Will any progress be made at the next round of talks between Iran and the West?

If no progress is made does it quickly increase the likelihood of military action in the region?

There are more but I trust you all get the point as to the magnitude of the event risk to all of the markets over the next two to three weeks. All of the above have implications for the market and are likely to impact the direction of the markets...at least for the short term. In addition to all of the normal technical and fundamentals approaches you use for trading and investing for the next two to three weeks you must pay close attention to not only the outcome of all of the events but the 30 second news snippets hitting the media airwaves leading up to all of the events. The only guarantee is markets will remain volatile with sudden price reversals as we saw during Monday's US trading session.....

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OPEC Spare Capacity in the First Quarter of 2012 at Lowest Level Since 2008

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The U.S. Energy Information Administration (EIA) estimates that global spare crude oil production capacity averaged about 2.4 million barrels per day (bbl/d) during the first quarter of 2012, down about 1.3 million bbl/d from the same period in 2011 (see chart below). The world's spare crude oil production capacity is held by member countries of the Organization of the Petroleum Exporting Countries (OPEC). Spare capacity can serve as a buffer against oil market disruptions, and it gives OPEC additional political and economic influence in world markets. There is little or no spare capacity outside of the OPEC member countries.



Spare crude oil production capacity is now less than 3% of total world crude oil consumption—the lowest proportion since the fourth quarter of 2008—based on EIA estimates.

Spare crude oil production capacity is an important indicator of producers' ability to respond to potential disruptions; consequently, low spare oil production capacity tends to be associated with high oil prices and high oil price volatility. Similarly, rising spare capacity tends to be associated with falling oil prices and reduced volatility. However, spare capacity must also be considered in the context of a number of other market factors that can drive crude oil prices, such as global supply, demand, and inventory levels.

EIA defines spare crude oil production capacity as potential oil production that could be brought online within 30 days and sustained for at least 90 days, consistent with sound business practices. This does not include oil production increases that could not be sustained without degrading the future production capacity of a field.


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Warm Weather and Low Natural Gas Prices Dampen Spot Electricity Prices This Winter

E-Minis Unfair Advantage....Have You Watch This Yet?

 The combination of one of the warmest winters (November-March) in decades and low spot natural gas prices contributed to low wholesale electric prices at major market locations during the winter of 2011-2012 (see chart below). Warm weather kept electric system load low across the East Coast and helped dampen the need for coal fired generation. Natural gas generation was up significantly to take advantage of low natural gas prices. Reduced nuclear generation due to outages and reduced hydropower generation both served to moderate declining electricity prices in much of the country.

• Spot Prices
• Weather
• Demand
• Coal vs. Natural Gas
• Hydroelectric
• Nuclear

On peak, wholesale electricity prices generally ranged from $20-$50 per megawatt hour last winter, with some exceptions. Electricity prices dropped during the winter, especially starting in January, as spot natural gas prices neared their lowest levels in the past decade.  

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Natural Gas Weekly Update

• Natural gas prices remained above $2.00 per million British thermal units (MMBtu) over the report week (Wednesday to Wednesday) at most trading locations across the country. The Henry Hub price closed within a 9 cent range, settling at $2.36 per MMBtu yesterday (up 5 cents for the week).
• The natural gas futures market generally trended higher over the week. At the New York Mercantile Exchange (NYMEX), the June 2012 natural gas contract gained 21.2 cents per MMBtu to close at $2.465 per MMBtu yesterday.

• Working natural gas in storage rose slightly last week to 2,606 billion cubic feet (Bcf) as of Friday, May 4, according to EIA’s Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 30 Bcf for the week positioned storage volumes 799 Bcf above year-ago levels.
• The natural gas rotary rig count, as reported by Baker Hughes Incorporated on May 4, declined by 7 to 606 active units, 32 percent lower than the same week last year. Meanwhile, oil-directed rigs increased by 27 to 1,355 units, 45 percent above the same week last year.

Get more natural gas details at the EIA website

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EIA Publishes Monthly Biodiesel Production Data for 2010 and 2011

U.S. production of biodiesel was a record 109 million gallons in December 2011, according to new data released by the U.S. Energy Information Administration (EIA). Production came from 113 active biodiesel plants. Biodiesel production for all of 2011 was 967 million gallons, which was the highest level recorded since EIA began tracking this data. Biodiesel fuel is mainly used for transportation, similar to diesel fuel.



Monthly biodiesel production had both sharp increases and decreases in 2009 and 2010 due in part to the expiration and reinstatement of Federal tax credits and renewable fuels standards affecting biodiesel. After reaching 64 million gallons in November 2009, biodiesel production fell following the expiration of the blending tax credit of $1.00 per gallon at the end of 2009. With the December 2010 reinstatement of the blending tax credit effective through December 2011 and increased requirements for biomass based diesel under the renewable fuels standard, production rebounded from a low of 22 million one year before.

Annual biodiesel production was 516 million gallons in 2009. Production fell to 343 million gallons in 2010 but then rebounded to 967 million gallons in 2011.

Soybean oil was the largest biodiesel feedstock in 2011, at 4,136 million pounds consumed. The next three largest biodiesel feedstocks during 2011 were canola oil (847 million pounds), yellow grease and other recycled feedstocks (665 million pounds), and white grease (533 million pounds).


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Top 5 Producing States Combined Marketed Natural Gas Output Rose in 2011

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Combined marketed natural gas production from the top five natural gas producing states...Texas, Louisiana, Wyoming, Oklahoma, and Colorado increased by about 7.5% in 2011, although their share of total U.S. natural gas output fell slightly to about 65%.

Marketed natural gas production from these states in 2011 totaled 15.7 trillion cubic feet (Tcf), according to annual data from the U.S. Energy Information Administration. The drop in their combined share of total U.S. production reflects increased contributions from other states, particularly those in which operators significantly expanded development of shale gas formations. Shale gas production from states such as Pennsylvania helped boost overall U.S. natural gas output by almost 8% in 2011.

Source: U.S. Energy Information Administration, Marketed Natural Gas Production, and Colorado Oil and Gas Conservation 

Due primarily to drilling programs in the Marcellus shale formation, Pennsylvania's marketed natural gas production in 2011 more than doubled to nearly 1.3 Tcf, according to preliminary estimates from Pennsylvania's Department of Environmental Protection. Arkansas has also seen strong growth in its marketed natural gas production, with output more than tripling since 2007 due mainly to increased production in the Fayetteville shale play.

Alaska is the country's second leading natural gas producer in terms of gross withdrawals, but most of the state's production is not brought to market, as production volumes far exceed local demand and there is insufficient pipeline capacity to transport the gas to distant markets. Most of Alaska's natural gas not brought to market is re-injected into existing oil fields to provide sufficient pressure to maintain oil production rates.

Highlights from the top marketed natural gas producing states in 2011.....

Texas: Natural gas production increased 4.5% from the year before to the highest level since 1980, due in part to growing output from the Eagle Ford shale formation where drillers who are aggressively pursuing high-value liquid hydrocarbons are also producing growing amounts of natural gas.

Louisiana: Natural gas production increased 38% as the Haynesville shale gas formation in the northwest part of the state was one of the biggest shale gas producing plays in the United States.

Wyoming: Natural gas production fell 5.6% to the lowest level since 2007, as lower natural gas prices made coalbed methane gas that accounts for almost two-thirds of the state's natural gas production less profitable because high-priced gas liquids aren't normally found in coal seams.

Oklahoma: Natural gas production increased 3.9% to the second highest annual output since 1994 due to higher output in the Woodford shale play.

Colorado: Natural gas production grew about 1.4% as output increased for the 25th year in a row to break another record output high. The Niobrara shale play in the northeast corner of the state helped raise Colorado's natural gas production.

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Project Sponsors are Seeking Federal Approval to Export Domestic Natural Gas

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Liquefied natural gas (LNG) project sponsors have been applying to the U.S. Department of Energy (DOE) for authorization to export LNG produced from domestic natural gas and to the Federal Energy Regulatory Commission (FERC) for approval to build liquefaction facilities to serve export markets (see map below). A higher price for LNG in international markets is a major motivation for these applications (see chart below).

Source: U.S. Energy Information Administration

The United States currently only ships LNG overseas through re-exports of imported LNG from the Freeport terminal in Texas, and the Sabine Pass and Cameron terminals in Louisiana. In 2011, LNG re-exports totaled about 53 billion cubic feet (Bcf), up from about 33 Bcf in 2010. The Kenai LNG terminal in Alaska, the only terminal that exported LNG produced from domestic natural gas, has been inactive since December 2011.

Source: U.S. Energy Information Administration

For more details visit the EIA website

How To Set the Right Profit Target and Stop Loss Levels

EIA: Spot Crude Prices Near 12 Month High, Natural Gas and Power Prices Near 12 Month Low

Key wholesale energy price benchmarks for crude oil, natural gas, and electric power reflect contrasting trends over the past year. International events have contributed to higher wholesale crude oil prices, whereas high levels of domestic natural gas production coupled with mild weather and record storage inventories have lowered wholesale natural gas prices. Because natural gas remains the marginal fuel in most electric power markets and because low heating and cooling demand in recent weeks have reduced electricity demand, electric power prices remain low as well. The figures above compare recent weekly price ranges (for March 29, 2012 - April 4, 2012) to the range of wholesale prices during the past year.

Cushing Crude Oil Inventories Rising in 2012

Crude oil inventories at the Cushing, Oklahoma storage hub, the delivery point for the NYMEX light sweet crude oil futures contract, are up by 12.0 million barrels (43%) between January 13, 2012 and March 30, 2012. This was the largest increase in inventories over an 11 week period since 2009. The inventory builds can be partly attributed to the emptying of the Seaway Pipeline, which ran from the Houston area to Cushing, in advance of its reversal. While Cushing inventories are now approaching the record levels of 2011, the amount of available storage capacity at Cushing is much greater now than it was a year ago, relieving some of the pressure on demand for incremental storage capacity.



 Historically, the Seaway Pipeline delivered crude oil from the U.S. Gulf Coast to Cushing, where it then moved to the refineries connected by pipeline to the storage hub. In November 2011, Enbridge Inc. acquired a 50% share in the pipeline from ConocoPhillips; at this time, Enbridge and joint owner Enterprise Product Partners announced they would reverse the direction of the pipeline to flow from Cushing to the Gulf Coast. Currently, the pipeline is expected to deliver 150,000 barrels per day (bbl/d) from Cushing to the Gulf Coast beginning in June 2012. The companies plan to expand Seaway's capacity to 400,000 bbl/d in 2013 and to 850,000 bbl/d in 2014.

In early March, approximately 2.2 million barrels from the Seaway pipeline was emptied into Cushing storage in order to prepare for the pipeline's reversal. This accounts for about 20% of the build in inventories during this period. However, even without the emptying of Seaway, inventory builds over the past months have been particularly steep compared to the five year average. As of January 13, Cushing inventories stood at 28.3 million barrels, slightly below their seasonal five year average. After the 12.0 million barrel increase, inventories were almost 11 million barrels above their average level, the largest such variation to average since June 2011. This is largely due to flows into Cushing as a result of increasing production in the mid-continent region.


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Nearly 69% of U.S. Crude Oil Imports Originated From Five Countries in 2011

 The amount of crude oil the United States imported from its top five foreign suppliers—Canada, Saudi Arabia, Mexico, Venezuela, and Nigeria—increased slightly during 2011, even though total U.S. crude oil imports fell to their lowest level in 12 years. As a result, the crude oil from these five countries accounted for a bigger share of overall U.S. crude oil imports, nearly 69%, or just over 6.1 million barrels per day (bbl/d).

Canada, Saudi Arabia, Mexico, Venezuela, and Nigeria have consistently been America's five largest crude oil suppliers, although their rankings varied from year to year. However, U.S. purchases of crude oil in 2011 increased from Canada and Saudi Arabia and declined from Mexico, Venezuela, and Nigeria, according to final trade data from EIA's February 2012 Company Level Imports report.

Combined crude oil imports from the five countries increased by less than 1% during 2011 to 6.1 million bbl/d. At the same time, total U.S. imports fell about 3%, or 0.3 million bbl/d, to 8.9 million bbl/d. That marked the lowest annual level of crude oil imports for the United States since 1999.

The combination of lower total U.S. crude oil imports and higher crude oil shipments from the top five foreign suppliers boosted their market share to about 69% of all U.S. crude oil imports during 2011, compared to 66% in 2010.


 Highlights from the U.S. top crude oil importing countries in 2011 included:

• Canada. Crude oil imports averaged a record 2.2 million bbl/d, up 12% from the year before, and topped 2 million bbl/d for the first time because more oil is now being transported by rail.
• Saudi Arabia. Crude oil imports averaged 1.2 million bbl/d, up 10% from the year before, and were the highest level since 2008.
• Mexico. Crude oil imports of 1.1 million bbl/d were down 4.5% from the year before and the second lowest since 1995, reflecting the steady decline in Mexico's crude oil production and rising domestic fuel demand.
• Venezuela. Crude oil imports of 0.9 million bbl/d were down 5% from the year before and the lowest since 1992.
• Nigeria. Crude oil imports of 0.8 million bbl/d were down 22% from the year before and the lowest since 2002, due in part to civilian unrest that disrupted the country's crude oil production.

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Five States Accounted for About 56% of Total U.S. Crude Oil Production in 2011

Combined oil production (crude oil and lease condensate) from the top five U.S. oil-producing states increased during 2011 (see chart above). The biggest gains were in North Dakota and Texas, due in large part to increased horizontal drilling and hydraulic fracturing activity. Texas, Alaska, California, North Dakota, and Oklahoma accounted for about 56% of U.S. oil production last year, according to EIA's February Petroleum Supply Monthly report.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly.
Note: Production data includes crude oil and lease condensate.

 Highlights from the top oil producing states in 2011 included:

• Texas. The Eagle Ford shale formation in south Texas contributed to gains in the state's oil production, which averaged 1,425 thousand barrels per day (bbl/d), the highest level since 1997.
• Alaska. Oil production fell for the ninth year in row, averaging 563 thousand bbl/d.
• California. Oil production averaged 535 thousand bbl/d, the lowest level in at least three decades.
• North Dakota. Preliminary data indicate increasing oil production from the Bakken formation pushed North Dakota ahead of California in December as the third biggest oil-producing state. North Dakota's oil production averaged 535 thousand bbl/d in December 2011 and 419 thousand bbl/d for the year.
• Oklahoma. Oil production averaged 204 thousand bbl/d during 2011, topping 200 thousand bbl/d for the first time since 1998.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly.

Note: Production data includes crude oil and lease condensate. 

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U.S. Petroleum Product Exports Exceeded Imports in 2011 For First Time in Over Six Decades

Source: U.S. Energy Information Administration, Petroleum Supply Monthly.
Notes: Net exports equal gross exports minus gross imports. Negative net export values indicate net imports.

The United States in 2011 exported more petroleum products, on an annual basis, than it imported for the first time since 1949, but American refiners still imported large, although declining, amounts of crude oil, according to full-year trade data from EIA's Petroleum Supply Monthly February report. The increase in foreign purchases of distillate fuel contributed the most to the United States becoming a net exporter of petroleum products.

U.S. petroleum product net exports (exports minus imports) averaged 0.44 million barrels per day (bbl/d) in 2011, with imports at a nine-year low of close to 2.4 million bbl/d and exports at a record high of nearly 2.9 million bbl/d. The gap between exports and imports widened the most during the second half of the year from August through December (see charts below), with total monthly exports topping 3 million bbl/d for the first time.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly.

Strong global demand helped propel distillate exports, as distillate fuel, which includes diesel, had a higher profit margin for U.S. refiners than gasoline. Refiners also had access to increased supplies of crude oil imports from Canada, which in 2011 topped 2 million bbl/d for the first time, and from North Dakota's Bakken formation to process into petroleum products.

The United States remained a net importer of crude oil, some of which was refined into petroleum products that were then exported. Petroleum products were ranked second in value of all U.S. exports during 2011 at $111.1 billion, up 60% from 2010, according to U.S. Department of Commerce trade data. Vehicles were the number one U.S. export last year at $132.5 billion. Crude oil was the biggest U.S. import, valued at $331.6 billion, up 32% from 2010. Rising crude oil prices, rather than higher crude oil import volumes, were the key driver of the increased value of crude oil imports.

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Crude Oil and Product Markets Over the Past Two Months

On February 29, 2012, EIA released The Availability and Price of Petroleum and Petroleum Products Produced in Countries Other Than Iran, a 60 day recurring report required under Section 1245(d)(4)(A) of Public Law 112-81, the National Defense Authorization Act for Fiscal Year 2012. The Act requires that, not later than 60 days from enactment and every 60 days thereafter, the "Energy Information Administration, in consultation with the Secretary of the Treasury, the Secretary of State, and the Director of National Intelligence, shall submit to Congress a report on the availability and price of petroleum and petroleum products produced in countries other than Iran in the 60 day period preceding the submission of the report."
EIA estimates that the world oil market has become increasingly tight over the first two months of this year.

Source: U.S. Energy Information Administration, based on Chicago Mercantile Exchange (CME), Intercontinental Exchange (ICE), and Dubai Mercantile Exchange (DME).  Note: Prices represent rolling 5-day averages. 

Oil prices have risen since the beginning of the year and are currently at a high level. Global liquid fuels consumption is at historically high levels. While the economic outlook, especially in Europe, remains uncertain, continued growth is expected. Unusually cold weather in Europe contributed to tighter markets by increasing the demand for heating oil, particularly during February.

With respect to supply, the world has experienced a number of supply interruptions in the last two months, including production drops in South Sudan, Syria, Yemen, and the North Sea. Both the United States and the European Union (EU) have acted to tighten sanctions against Iran, including measures with both immediate and future effective dates.

Finally, spare crude oil production capacity, while estimated to be higher than during the 2003 to 2008 period, is quite modest by historical standards, especially when measured as a percentage of global oil production and considered in the context of current geopolitical uncertainties, including, but not limited to, the situation in Iran.

Crude oil prices have been generally rising over the past two months, particularly in recent weeks. This is reflected in price movements on the most commonly traded oil futures contracts. Comparing the 5 day periods ending December 30, 2011 and February 27, 2012, the price of the front month of the New York Mercantile Exchange (NYMEX) light sweet crude oil contract (WTI) rose from $99.77 per barrel to $107.66 per barrel. The Brent front month price, which is widely viewed as being more representative of global prices for light sweet crude oil, rose from $108.04 per barrel to $123.56 per barrel over the same period.

Gasoline prices have also generally been rising over the past two months, particularly in recent weeks. Reformulated blendstock for oxygenate blending (RBOB) is often traded instead of finished motor gasoline that already has been blended with ethanol, since oxygenate blending typically takes place at terminals along the distribution chain.

Comparing the 5-day periods ending December 30, 2011 and February 27, 2012, the price of the front month of the NYMEX RBOB contract, which calls for delivery in New York Harbor, rose from $2.68 per gallon to $3.11 per gallon. RBOB prices reflect pricing at the wholesale-level that do not include motor fuel taxes, or costs and profits associated with the distribution and retailing of gasoline. However, increases in RBOB prices are typically reflected in higher pump prices.

Source: U.S. Energy Information Administration, based on Chicago Mercantile Exchange (CME). 

Notes: Prices represent rolling 5 day averages. Reformulated blendstock for oxygenate blending (RBOB) is often traded instead of finished motor gasoline that already has been blended with ethanol, since oxygenate blending typically takes place at terminals along the distribution chain.

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Phil Flynn: A Better Future for Price Predictions

The Energy Information Agency came out with their latest Short Term Energy Outlook and I was glad to see that they are using the futures markets to improve their market forecasts. While the EIA has done a phenomenal job in the past providing the industry and traders with valuable information, it seemed that their price projections were always a bit behind the curve. More often than not, especially during the days of the strong bull petroleum market, it seemed that the Energy Information Agency was always playing a bit of catch up.

Of course it wasn't always their fault. You see there was an era of denial about the reasons for the bull market and if the EIA dared come out about the odds for sharply higher prices, they might have been accused of feeding into the bullish frenzy. The EIA really had to be careful about stepping out about a bullish price projection even if deep within the walls of the Department of Energy they felt that higher price were a possibility.

That restraint sometimes led to conservative calls that were meant not to rattle a market that was already looking for an excuse, any excuse, to reflect the reality of increasingly bullish fundamentals.....Read the entire article.

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