Beware the Ides of March and be aware of the drop in distillate inventories in this week’s oil inventory report. Even Julius Caesar himself might have reason to be concerned about Europe and their cold winter and concerns to rebuild supply ahead of an Iranian oil embargo. The Energy Information Administration reported that distillate fuel inventories dropped by 4.7 million barrels, much further than expectations, last week falling into the middle of the average range for this time of year.
Reuters News reported that diesel differentials in northwest Europe edged up again on Wednesday, supported by lower refinery runs, particularly in the tight Mediterranean market, refinery outages and a slight pick- up in German demand. Planned maintenance was underway at the Ineos Grangemouth refinery in Scotland, with the closure of a CDU earlier this week. The refinery has the capacity to process 210,000 barrels of crude oil a day, with diesel accounting for some 24 percent of the output. Traders added that northwest Europe differentials were buoyed by the tightness in the Mediterranean market as the simple refineries there have cut runs. "With the high crude price their margins have been coming down," said one diesel barge trader. However, he saw some of the tightness easing soon as more arbitrage cargoes are coming from Asia and the United States."
The Energy Information Administration also reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.8 million barrels from the previous week. At 347.5 million barrels, U.S. crude oil inventories are in the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 1.4 million barrels last week and are in the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories remained unchanged from last week.
Yet despite the fact that, as reported by Bloomberg News, "President Barack Obama said Iran is running out of time to enter serious negotiations over its nuclear program, as sanctions increasingly squeeze Iran’s economy. Obama said at a White House news conference with U.K. Prime Minister David Cameron that Iran has been offered every opportunity to resolve the confrontation through negotiations with the U.S. and its partners. Instead they have sought “to delay, to stall,” he said. “The window for solving this issue diplomatically is shrinking,” Obama said. “I’m determined to prevent Iran from getting a nuclear weapon.” Oil was facing headwinds from the improving outlook for the US economy.