Economic Bump Looking Less Likely… NYTimes

by Jim Colburn • Saturday, May 27, 2017

The underrated NYTimes business section lays out US GDP possibilities here:

Economist Diane Swonk is quoted:

““We’re still on track for a 2 percent growth economy, give or take a little, but not a 3 percent economy,” said Diane Swonk, a veteran independent economist in Chicago. “It may not sound like much, but the difference is important.”

In a $17 trillion economy, it is a difference of $170 billion per year, which has major implications for corporate profits, worker pay and even the federal government’s bottom line.”

“Those two factors [aging population, low productivity]make for headwinds that are hard to overcome,” she said.”

The Times includes a chart showing how economists have mostly overestimated GDP:

The Atlanta Fed’s GDP Nowcast for 2Q is now at 3.7%:

The NY Fed’s Nowcast is a bit lower:





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“Days supply” tightens for crude oil and distillates…

by Jim Colburn • Thursday, May 25, 2017

“Days supply” is simply stocks divided by daily demand… It is a useful measure that puts stock levels into context with consumption…  Crude oil and distillates stocks are declining relative to demand compared to last year… Gasoline is around unchanged… Here are the charts from This Week in Petroleum:

Gasoline is slightly above last year:

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Gasoline prices moderate heading into Memorial Day… EIA

by Jim Colburn • Thursday, May 25, 2017

Here is the price chart from This Week In Petroleum:

“Gasoline demand has fallen from last year, putting further downward pressure on prices. As of May 19, the four-week average U.S. demand is 178,000 barrels per day (b/d), approximately 2%, below 2016 levels. Despite declining demand in 2017 so far, AAA (in association with IHS Markit) expects over 39 million Americans to travel this weekend, 1 million more travelers than last year and the highest travel volume since 2005.
High inventories, including finished gasoline and gasoline blending components, are also contributing to the downward pressure on gasoline prices. Gasoline inventories have been averaging near 2016 levels (near the upper bound of the five-year range), rising above last year’s levels for two weeks recently before dipping to 239.9 million barrels, slightly less than the 2016 inventory levels of 240.1 million barrels. This trend corresponds with strong refinery and blender net production of finished motor gasoline, which has been equal to or greater than 2016 4-week average levels for 10 straight weeks.”


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Fuel economy improvements to reduce future gasoline use…EIA

by Jim Colburn • Tuesday, May 23, 2017

In the EIA’s Today in Energy:

“The net effect of these fuel economy trends is that light-duty vehicle energy consumption is projected to decrease 12%, from 16.1 quadrillion British thermal units (Btu) in 2017 to 14.2 quadrillion Btu in 2025 in the AEO2017 Reference case, despite projected growth in vehicle-miles traveled of 5% over the same period. Nearly all of this energy consumption is gasoline, with gasoline consumption by light-duty vehicles projected to fall from 8.7 million barrels per day in 2017 to 7.5 million barrels per day in 2025.”


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The markets frustrate OPEC… The Economist

by Jim Colburn • Monday, May 22, 2017

From The Economist:

Moreover, global demand this year has been weaker than expected. In a report this week, Roland Berger, a consultancy, argued that rich-country oil demand has peaked, and that, as developing countries such as China and India industrialise, they will use oil more efficiently than did their developed-world counterparts (see chart). All this raises doubts about how far the oil price can climb.

There is more here:

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Saudi Arabia feeling the budget pressure… Reuters

by Jim Colburn • Monday, May 22, 2017

I posted an EIA piece last week showing the decline in OPEC oil revenues over the past few years… Here is Andrew Torchia, Reuters, on the Saudi budget:

“The result is likely to be that the budget deficit for 2017 comes close to Riyadh’s original projection of 198 billion riyals. Though that would be a marked improvement from last year’s 297 billion riyals, at about 8 percent of gross domestic product it would still be too high for comfort.

“Similarly, oil prices could have a big impact on the Aramco IPO. Consultants Sanford C. Bernstein have estimated that Aramco would make a net profit of $13.30 a barrel on its upstream production with oil at $50, but $16.90 at $60.

That suggests a $10 swing in the oil price could conceivably make a difference of hundreds of millions of dollars to Aramco’s IPO valuation, helping to determine whether the government can claim it is getting a good price.”

Here is the whole story:

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Peak Oil Demand… WSJ

by Jim Colburn • Monday, May 22, 2017

The Wall Street Journal does a nice job laying out some major oil companies’ thoughts on peak oil demand:

I could get snarky and say this won’t change traders’ views on July WTI options, but OPEC/Saudi Arabia certainly understand the risk of fossil fuels losing market share to renewables… High oil prices quicken the process…




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Greg Ip, WSJ on full employment trade-offs…

by Jim Colburn • Friday, May 19, 2017

Read the whole, excellent article here, but I mostly like the chart:

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OPEC net oil revenues.. EIA

by Jim Colburn • Friday, May 19, 2017

From the EIA’s Today in Energy, OPEC’s pain in two charts:

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US gasoline demand weak but expected to strengthen this summer…Reuters

by Jim Colburn • Friday, May 19, 2017

We discussed the current situation/outlook for the gasoline market in our latest podcast, but here is Reuters:

“Gasoline demand in the first two months of 2017 was down 2.1 percent from a year ago, according to the U.S. Energy Information Administration. The U.S. gasoline market accounts for roughly 10 percent of global oil consumption, so American motorists have outsized influence over the global petroleum supply.”

We talked about a lifestyle change of people not going out as much (per capital miles driven is below all time highs and Netflix and Domino’s pizza are doing quite well…) but Reuters suggests another reason for weak demand this year:

“Analysts and refiners blamed the drop in gasoline demand to unusually bad weather in California and Texas, states with the highest U.S. driving volumes. California’s rainfall in January and February was more than double the amount in the same period last year, according to the U.S. National Oceanic and Atmospheric Administration.”


“The American Automobile Association projected that 34.6 million people will drive 50 miles (80 km) or more from home during the end-of-month holiday period, most since 37.3 million in 2005.”

And this…

” U.S. vehicle miles traveled on U.S. roads were up 1.5 percent from last year through the first three months of 2017, according to the U.S. Department of Transportation.  Analysts said higher fuel efficiency standards are starting to take hold, which could mean U.S. gasoline demand will peak soon.”

Do read the whole thing…

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