Yeah, that’s like saying there’s a story in the news because one of the Kardashians went grocery shopping and bought something that is not organic. This is the world we live in; get over it, it happens. There are more important things out there happening in the oil world nobody wants to hear anything that is not sensationalized. I’m not talking about $10 oil or $5 gasoline so if you’re looking for a headline, all I have is some brouhaha between Katy Perry and Taylor Swift. When it comes to oil though, I can tell you that it’s not really as bad as everyone thinks.
I’ve informed the teeming millions that there is no “oil glut” in the United States. The problem is we’re too stubborn to do more deals like the Mexican one that passed last Friday. If we started getting rid of the excess light, we wouldn’t have to import all of the still needed heavy grades. And one thing for sure, we’re not going to stop production here in the United States so we can increase imports once again. Yeah, that’s not going to bode well in an election year. That’s like telling farmers we’re going to start to import corn and cut government loans. The highlight here is again our demand for crude oil. Aside from the glitch in system with BP’s Whiting, we’re running the United States refining system at record levels.
Don’t listen to anyone trying to tell you we ran this high or higher as a percentage. We’ve never run this much crude through our refining system. That’s a fact because our refining system never had a capacity of 17.8MM barrels per day (b/d). Our refining system has never gone through a summer (Jun-Aug) running a current 16.7MM b/d. Yes, Whiting will take out some of that rate, but it’s likely to be compensated and we’ll find out more tomorrow what that is going to look like. The bottom line here is that refinery runs are pulling in more crude than we’ve ever seen and demand is a lot higher than the numbers say. For those not getting it, remember that demand increases as our import number goes higher.
Since that ’s been cut by at least 40% in everything from crude to gasoline, it gives the illusion that demand is low. This is right where we all need to understand that refinery maintenance in Fall isn’t when the sky will be falling. Well sort of, but it’s relative to where it’s falling from. See, fall maintenance usually cuts out about 700K b/d of refining capacity from October through November. At our current run rate of summer, we’d end up still running 16MM b/d...during turnarounds. In the past few years we’ve slogged through some fall maintenance with refineries under 15MM b/d so this year we’re still going to be running at least 1MM b/d more.
I’m not sure how pulling in another 7MM barrels of crude every week is supposed to increase the inventories, but hey, who am I to argue with an oil glut? Just for fun, let’s say that somehow we make it through fall maintenance and make up those 8 weeks and 56MM barrels of crude. We then come back and over the past two years we’ve actually seen crude runs increase by 250K b/d in December over the summer numbers. This year it would mean that we’d average 16.9MM b/d. Eh, who am I to make a big deal out of that?