Oil prices hit a new high for the year as refinery runs and imports hit lows for the year. The Energy Information Administration (EIA) reported a 5.2 million-barrel drop in crude oil supply even as US refinery runs fall to 85% of their operable capacity, the low for the year. Refiners ran a mere 15.4 million barrels of oil a day while overall product demand is running over 20 million barrels a day.

You might be able to blame some of the recent drawdowns in oil inventory on hurricanes and pipeline issues, but normally we would have seen at least on big rebound in supply once in the last 7 weeks. Instead we only saw one small increase in the last 7 weeks suggesting that there are more than just transitory issues reducing supply but a rebalancing of the global oil market.

US oil imports did fall averaging 6.9 million barrels per day last week, down by 954,000 barrels per day from the previous week which some say was hurricane related but gasoline inventories seemed to get into port just fine. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 871,000 barrels per day leading to a 2.5million barrel increase in supply and distillate fuel imports averaged 32,000 barrels per day last week but we still saw a 1.2-million-barrel supply drop. Cushing, Oklahoma saw a big drop on piling miniatous and the fallout from protestors shutting down pipelines.

So where is all the oil going? Some of the supply that may have found its way to the US is in part going to China. Chinese oil production is tanking while China’s teapot refineries are humming. Bloomberg reported that China is producing 3.9 million barrels a day, rebounding from the lowest since December 2009. Chinese oil production dropped 9.8 percent in September from a year ago to 15.98 million metric tons, the bureau said, while falling 6.1 percent during the first nine months of the year. Low oil production in China means an increase in imports.

While we may see some profit taking ahead of the November contract expiration, the charts suggest that we will see more highs in the coming days and weeks.

Natural gas paused ahead of the EIA supply report today! Market expectations are for a 73 bcf increase. While the weather forecast short term is bearish, a smaller than expect injection will send this market to new highs. Stay tuned!