Oil trading on Iran tensions, inventories secondary

This week's oil inventory reports will be delayed by one day due to the closing of US government offices for a holiday yesterday. The API data will be released on Wednesday afternoon while the EIA data will hit the media airwaves at 11 AM EST on Thursday. At the moment oil prices are still being mostly driven by the tensions building in the Middle East between Iran and the West (as discussed above) coupled with the direction of the euro and the US dollar. As such I am not sure many market participants are going to pay much attention to this week's round of oil inventory data suggesting that this week's oil inventory reports may not have a major impact on price direction. At the moment all market participants are continuing to follow the new snippets out of the Middle East and the tick by tick direction of equities and the US dollar (driven by Europe)... as they are both the primary price drivers for oil. Even with the fundamentals and geopolitics starting to impact price it is the macro trade that dominates at the moment. As such this week's oil inventory report could remain a secondary price driver at best and only impact price direction if the actual EIA data is noticeably outside of the range of market expectations for the report.

My projections for this week’s inventory reports are summarized in the following table. I am expecting across the board builds in inventory this week with a modest build in crude oil stocks along with a decrease in refinery utilization rates. I am expecting a strong build in gasoline inventories and an unseasonable build in distillate fuel stocks as winter like weather did not arrive during the report period in most parts of the US...especially the large HO market along the north east. I am expecting crude oil stocks to increase by about 2.0 million barrels. If the actual numbers are in sync with my projections the year over year surplus of crude oil will come in around 0.9 million barrels while the overhang versus the five year average for the same week will widen around 16.3 million barrels.

With refinery runs expected to decrease by 0.3% I am still expecting a build in gasoline stocks. Gasoline stocks are expected to increase by about 2.0 million barrels which would result in the gasoline year over year deficit coming in around 1.9 million barrels while the surplus versus the five year average for the same week will come in around 6.5 million barrels.

Distillate fuel is projected to increase by 1.5 million barrels on a combination an increase in production and lower than normal heating oil consumption. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year the deficit will likely now be about 16.7 million barrels below last year while the surplus versus the five year average will come in around 0.6 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 for the same week was directionally in sync with the projections for this week. As such if the actual data in line with the projections there will not be a major on the year over year comparisons.

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