Global oil demand forecast downgraded for 2011 and 2012

The API data came in with a few surprises once again this week. The API reported another large surprise in inventory except this time it was a 5.1 million barrel draw in crude oil stocks... mostly all a result of the preemptive production shut-in and halting of imports ahead of TS Lee. The API reported a surprise build in gasoline inventories versus a projected draw and a small build in distillate fuel that was close to the expectations.

The market was expecting a more modest draw in crude oil stocks and a small decline in gasoline inventories this week. The main bullish item in the report was the larger than expected draw in crude oil inventories. The API reported a large draw of about 5.1 million barrels of crude oil with a 400,000 barrels decline in Cushing and no change in PADD 2. The bulk of the draw was in PADD 3 or the Gulf region as related to TS Lee. So on the surface it looks bullish but in reality it is not overly bullish as the loss of imports and production were just temporary and are all back to normal already. On the week gasoline stocks increased by about 2.8 million barrels while distillate fuel stocks were built by about 0.1 million barrels. The refined products part of the report was bearish.

With the financial and commodity markets still in state of turmoil and uncertainty it is not clear if today's EIA oil inventory reports will have a major impact on price direction. The more widely watched EIA data will be released at 10:30 am today. My projections for the EIA inventory reports are summarized in the following table. I am expecting an across the board draw in inventories and a decline in refinery utilization rates which should result in a supportive or bullish weekly fundamental snapshot. I am expecting a modest draw in crude oil stocks with a decrease in refinery utilization rates. I am expecting a modest draw in gasoline inventories and a smaller build in distillate fuel stocks. I am expecting crude oil stocks to decline by about 3.0 million barrels. If the actual numbers are in sync with my projections the year over year deficit of crude oil will widen to about 7.3 million barrels while the overhang versus the five year average for the same week will come in around 24.4 million barrels. My projection risk for crude oil is to the upside as stocks could have actually declined a lot less than expected as the storm did not cause any infrastructure damage.

With refinery runs expected to decrease by about 0.4% I am expecting a modest draw in gasoline stocks as demand likely decreased but imports possibly increased. Gasoline stocks are expected to decline by about 1.0 million barrels which would result in the gasoline year over year deficit narrowing to around 16.6 million barrels while the deficit versus the five year average for the same week will come in at about 1.1 million barrels.

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