Phil Flynn
About The Author

Phil Flynn

Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665

Refiners jingle bell rocked out gasoline production to an astounding 10.129 million barrels a day! That exceeded the Energy Information Administrations (EIA) implied gasoline demand number that came in at 9.091 million barrels, apparently up from last week’s Thanksgiving report where most people supposedly stayed home. The production over demand led to 5.7 million barrels increase in supply that was double the markets expectations.

This came as U.S. crude supply continued to plunge, falling by 5.1 million barrels led by a 3.317 drop in the Cushing Oklahoma delivery point. That was the fourth drop in a row and the biggest draw down in eight years. The supply drop in Cushing was partly related to the ongoing fallout from the Keystone pipeline leak, near record refinery, gasoline and distillate production is going to keep the demand for crude strong as refiners look to make up for below normal distillate supply. Refinery crude runs did fall slightly by 243,000 barrels per day as runs fell to 93.4% of capacity. Still, it is a very high-capacity rate to be running at anyway. Over all crude stocks are at the lowest level since October 2015.

Yet, despite refiners near record production and their best efforts, there was no gain in distillate stockpiles, which fell 1.4 million barrels, versus expectations for a 902,000-barrel increase. The EIA reported an increase in U.S. oil output to 9.78 million barrels a day last week but even the EIA is skeptical of that number. U.S. production is on the rise but is still being overstated by the EIA data.

A lot of talk of shale oil producers and investors ramping up investment and production into the new year. That is going to be needed as my sources tell me that the average shale oil well, even in the Permian basin, is producing 25% to 40% less oil then wells a year ago. That means that the EIA will have to adjust downward their production estimates again.

Dow Jones reported that OPEC production fell to its lowest in six months, but rival U.S. production was surging faster than expected, meaning oil markets may not rebalance before the end of 2018, the oil cartel said Wednesday in its closely watched monthly oil report.  OPEC crude fell by about 133,500 barrels a day in November to 32.45 million barrels a day. Yet OPEC might not have to worry as much as they think because of the EIA overestimates.

The dollar reversed course after the Fed and that is helping oil comeback. Traders feared the Fed might talk about more than three rate hikes! When the Fed plotted just three, the dollar sold off in relief. This drop should give a boost to metals that had sold off in anticipation of the Fed.

We are looking for a 44 draw in Natural gas in today’s report. This market is due for a bounce, but it needs a polar vortex to overcome surging U.S. production! Or it needs everyone to double down and put up more Christmas lights! Or better yet! Get more super computers and mine for Bitcoin.
Thanks,
Phil Flynn
Questions? Ask Phil Flynn today at 312-264-4364

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Stay tuned to the Fox Business Network where you get the Power to Prosper!  Make sure you see me at the Orlando Money Show! I will be among some amazing speakers! You can also sign up for my master class that will go over why oil has hit the most significant bottom in a generation. Shale potential and limitations and the danger of the lack of investment in energy that could help spark a future financial crisis. Go to Flynn.OrlandoMoneyShow.com This show fills up quickly so make sure you secure a seat. Call to get the daily trade levels at 888-264-5665 or email me at pflynn@pricegroup.com

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