My projection for this week’s EIA inventory report is summarized in the following table. I am expecting a mixed report for US oil stocks but yet another overall build in total commercial stocks of crude oil and refined products combined. I am expecting another strong build of about 2.5 million barrels of crude oil inventories mostly as a result of the industry readjusting inventories after managing end of year stock levels as well as a modest increase in imports. If the actual numbers are in sync with my projections the year over year surplus of crude oil would come in at 14.3 million barrels while the overhang versus the five year average for the same week will be about 20.2 million barrels.
With runs expected to only decrease by about 0.1% and with imports expected to increase a bit I am expecting another strong increase in gasoline stocks. Gasoline stocks are expected to build by about 1.5 million barrels which would result in gasoline stocks hovering around 20-year highs for this time of the year. This week the gasoline year over year surplus is projected to widen of around 7.3 million barrels while the surplus versus the five-year average for the same week will widen to about 12.5 million barrels. Gasoline stocks will have built for seven weeks in a row if my projection for another build this week is in line with the actual. If so, gasoline stocks will have increased by about 20 million barrels over the aforementioned timeframe.
Distillate fuel is projected to decline modestly by 1.3 million barrels mostly as a result of the colder than normal temperatures we have been experiencing in the eastern half of the US. As has been the case for the last seven weeks or so it is only heating oil stocks that have been destocking as diesel fuel inventories have been rising strongly over the last two months as the US economy continues to grow very slowly. The latest NOAA weather forecasts are now calling for a return to not only normal winter temperatures but above normal temperatures for a good portion of the second half of February. With the vast majority of the winter heating season now in the history books, the consistent decline in heating oil stocks may also start to perform much like diesel stocks have been over the last several months and that is to start into a premature inventory building pattern during the projecting moderation of temperatures during the second half of February. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 6.6 million barrels above last year while the overhang versus the five-year average will be around 23.4 million barrels.
Refiners are continuing to try to manage the overhang of crude oil by converting into refined products and moving products into inventory. Net result the US continues to remain well oversupplied of just about everything in the oil complex with supply expected to remain robust for the foreseeable future. The market will get a snapshot of projected fundamentals when the EIA released tier latest Short Term Energy Outlook early this afternoon. As mentioned yesterday I am expecting the EIA to keep their global oil demand projections pretty much at the same level as last month's report but we could see inventory projections coming in a bit less optimistic than last month. Overall I would expect today's report to be neutral at best and have a minimal impact on short term price direction at best.
As usual do not overreact to the API data as the EIA report is due out in a few hours and be cognizant that the API report is often not in line with the more widely followed EIA data.
My individual market view is detailed in the table at the beginning of the newsletter. I am maintaining my overall view at neutral and my short term bias at bearish for oil as the market is continuing to eliminate the Egypt factor from the price and quickly incorporating the China inflation effect…which is a mild negative.
I am maintaining my Nat Gas view at neutral and my short term bias at bearish as the weather projections for the second half of February are simply not supportive for Nat Gas prices. With supply still very robust and the advent of a round of warmer than normal winter weather conditions prices are likely to test the psychological and technical $4/mmbtu support levels. Weather is still the main driver of price direction but the oversupply situation continues to dampen any upside enthusiasm that may come from above normal heating fuel demand.
Currently most markets are positive as shown in the EMI Price Board table below.
Dominick A. Chirichella
Energy Market Analysis is published daily by the Energy Management Institute 1324 Lexington Avenue, # 322, New York, NY 10128. Copyright 2008. Reproduction without permission is strictly prohibited. Subscriptions: $129 for annual orders. Editor in Chief: Dominick Chirichella, Publisher: Stephen Gloyd, Editor Sal Umek.
EMA has authorized Futures to publish its report once a week on Wednesday prior to the EIA release. For information on how to receive the report everyday look below.
PH: (888) 871-1207
Information and opinions expressed in this publication are intended to provide general market awareness. The Energy Management Institute and the Energy Market Analysis are not responsible for any business actions, market transactions, or decisions made by its readers based on information published in this report. Readers of the Energy Market Analysis use this market information at their own risk.
This message and any attachments relate to the official business of the Energy Management Institute ("EMI") and are proprietary to EMI. This e-mail transmission may contain information that is proprietary, privileged and/or confidential and is intended exclusively for the person(s) to whom it is addressed. Any use, copying, retention or disclosure by any person other than the intended recipient or the intended recipient's designees is strictly prohibited.