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17 comments on A Few Charts of the US Crude Oil Supply and Stocks Situation

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Robert Rapier on October 31, 2007 - 5:56pm Permalink | Subthread | Parent | Comments top

Looking at refinery utilization it seems the US now has excess refining capacity.

We are still in turnaround season. Typically, October/November are the low utilization months in the fall, and February/March in the spring.

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memmel on October 31, 2007 - 6:24pm Permalink | Subthread | Parent | Comments top

I'm actually talking about the long term trend over the last two years we have been consistently low on refinery utilization vs the five year average.

Next consider that overall oil supply globally has dropped since 2005 and that new refining capacity has been added both globally and via expansions in the US and it seems safe to conclude that we now have excess refining capacity. Thats the simplest interpretation and we seem to have had it consistently for almost two years now. I understand that their has been a lot of work to add capacity for heavier oils but thats a different issues.

If you assume excess refining capacity then it makes sense that refining margins are razor thin even though the price of oil is high. I'm sure it depends on how a refinery is configured but I'd have to guess you cannot profitably run a refinery below say 75% capacity before you simply have to start shutting it down.

So to me the simplest answer for the current situation is not only a US glut in refining capacity but probably a global glut.

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jkissing on October 31, 2007 - 7:29pm Permalink | Subthread | Parent | Comments top

I fully agree... and, it will get worse. Heavy sour/vanadium crude will soon be produced and refined in sa to replace light sweet they used to sell, meaning more refineries without more crude, placing further downward pressure on all existing refineries. Least efficient will shut down, second bit of infrastructure no longer needed (tankers are already in excess supply, facing the problem of flat production and higher exporting country consumption = fewer shipments.)

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17 comments on A Few Charts of the US Crude Oil Supply and Stocks Situation

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