Oil waiting on Bernanke press conference

Even with refinery runs expected to increase by about 0.3% and with imports expected to hold steady, I am expecting a modest draw in gasoline stocks. Gasoline stocks are expected to draw by about 1 million barrels which would result in the gasoline year-over-year deficit widening to 16.6 million barrels while the surplus versus the five-year average for the same week move into a deficit of 1.5 million barrels.

Distillate fuel is projected to increase modestly by 0.6 million barrels on a combination of minimal weather demand as well as an increase in production. The latest NOAA forecast is projecting above normal temperatures across portions of the US for the next several weeks thus reducing any hopes for a continuation of atypical spring heating related consumption. The forecasts are a negative for heating oil especially after the last several weeks of bullish weather reports. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 2.9 million barrels below last year while the overhang versus the five-year average will be around 22.2 million barrels. With the beginning of the inventory injection season now underway for heating oil and with total distillate fuel inventories already at very comfortable levels there are not likely to be any supply issues anytime soon.

Net result, the US continues to remain well supplied but with the accelerated decline in gasoline stocks and the overall destocking pattern in general the fundamentals are becoming more of a supporting factor for the first time in several years.

As usual do not overreact to the API data as the EIA report will be released this morning. The API report is not in line with the more widely followed EIA data more often than not and as such it is always prudent to verify the API results by waiting a few more hours for the EIA data to be released. If the EIA report is within the projections I would expect the market to view the results as neutral. If the EIA data is more in line with the API data the market will likely view it as biased to the bullish side from a macro overview and a mild positive for the WTI versus Brent spread. Whether or not the market reacts at all to the inventory report will be dependent on what is going on with the events of the day.

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