Oil corrects amid small inventory build

At the moment oil prices are still being mostly driven by the tensions evolving in the Middle East between Iran and the West (as discussed above) and to a much lesser extent based on 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 a mixed inventory report this week with a modest build in crude oil and gasoline stocks, a small decline in distillate stocks along with a small increase in refinery utilization rates. I am expecting a small build in gasoline inventories and a below normal draw in distillate fuel stocks as winter like weather was absent for most of the report period in many parts of the US...in particular the east coast. I am expecting crude oil stocks to increase by about 1.2 million barrels. If the actual numbers are in sync with my projections the year over year deficit of crude oil will come in around 4.5 million barrels while the overhang versus the five year average for the same week will widen to around 6.7 million barrels.

With refinery runs expected to increase by 0.3% I am expecting a modest build in gasoline stocks. Gasoline stocks are expected to increase by about 0.5 million barrels which would result in the gasoline year over year deficit coming in around 6.3 million barrels while the deficit versus the five year average for the same week will come in around 2.7 million barrels.

Distillate fuel is projected to decrease by just 0.2 million barrels on a combination of steady exports and a bit of warmer than normal weather last week. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 15.9 million barrels below last year while the surplus versus the five year average will come in around 3.6 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 the inventory changes were relatively minimal. As such if the actual data in line with the projections there will be some minor changes in the year over year comparisons for most everything in the complex except for crude oil inventories.

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