US Oil Production Ticked Higher For A 2nd Straight Week

Refined products are rallying nearly 2% to start Thursday’s trading after a choppy session Wednesday put an end to the heavy selling. Traders around the world continue to wait anxiously as Israel has apparently determined that revenge is a dish best served cold, while many in the US nervously await word on the damage done by Milton.

Some bullish gasoline figures in the DOE’s weekly report helped to end the selloff in RBOB futures, with prices rallying a nickel off their morning lows. Most notably was a huge increase in the demand estimate for the week to the highest level of the year, a full month after the end of driving season. That increase in “product supplied” coupled with another dip in refinery runs pushed gasoline days of supply to their lowest levels of the year. It’s worth pointing out the fickle nature of the weekly demand estimates and just a few weeks ago the EIA offered an explanation on how those calculations are made.

Even though refinery runs have dipped the past couple of weeks, run rates remain above their 5 year average, with increased production on the US Gulf and East Coasts offsetting slower runs in PADDs 2,4 & 5.

US oil production ticked higher for a 2nd straight week, and is now back to its record high level of 13.4 million barrels per day, despite the low rig count, and recent disruptions from multiple Gulf Coast hurricanes. For perspective, based on the EIA’s data, the US is currently producing more oil than any country ever has, and we’re doing it with less than half of the drilling rigs that were operating 10 years ago. See charts from the DOE’s weekly report below.

Hurricane Milton made landfall around 8pm Wednesday night, roughly 60 miles south of Tampa Bay. While the devastation is apparent in early reports, the path to the south of the bay, and the earlier-than-predicted landfall both helped to avoid the worst-case scenario of a direct hit pushing a 15 foot wall of water into the bay area during high tide.

As the storm moves off-shore this morning, the recovery efforts have already begun and the industry (along with many others) will be in wait and see mode to determine if the Tampa fuel terminals can come back online without major repairs, which will also determine whether or not Orlando can be supplied via the connecting pipeline or if resupply will have to be long hauled in. Good news in the early going is that some Jacksonville-area terminals that had shut as a precaution are already selling fuel this morning, and terminals along the FL panhandle have continued operating throughout. In other good news, Joe Malinski, BKA Lt. Dan made it through the storm on his 12’ boat.

The September CPI report showed more good news on inflation that was up just 2.4% over the past 12 months. Of course if you have the capacity to read past the headlines, you’ll also notice that the big drop in fuel prices this year is the key contributor to inflation staying in check while most other items are up well over 3%, and services excluding energy are up nearly 5%.