Continued oil selling shows focus on weak economy

Distillate fuel is projected to increase modestly by 1.1 million barrels on a combination of no weather demand as well as an increase in production. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 16.7 million barrels below last year while the overhang versus the five year average will be around 8.1 million barrels.

The following table compares my projections for this week's report (for the categories I am making projections) with the change in inventories for the same period last year. As you can see from the table last year experienced an across the board build in stocks (excluding crude oil) along with an across the board decline in implied demand. Thus based on my projections the comparison to last year will appreciate a tad in that this year's level will gain ground versus the same week last year. As such I do expect a noticeable change in the year over year status if the actual numbers are in line with my projections.

As usual do not overreact to the API data as more often than not it is not in line with the more widely followed EIA data. If the EIA report is within the projections I would expect the market to view the results as mostly neutral. However, whether or not the market reacts at all to the inventory report will be dependent on what is going on in the financial markets.

The tropical weather is still active with a newly named Tropical Storm...Emily that is currently sitting southeast of Puerto Rico. The latest forecast by the National Hurricane Center shows the severity of Emily not getting much stronger over the next week or so (staying a tropical storm). The projected path is showing that the storm is likely to head up the Florida Coast and then up to the southeastern part of the country. At the moment Emily does seem to be headed for the energy producing region of the US Gulf Coast and thus a storm to watch but not one that will impact oil or Nat Gas prices at the moment. There are no other tropical weather patterns at the moment.

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