Oil driven lower by European risks while waiting on inventories

My projections for this week’s inventory reports are summarized in the following table. I am expecting a build in crude oil and distillate fuel with a small decline in gasoline stocks. I am expecting a build in crude oil inventories and a build in distillate fuel stocks as the summer planting season is winding down (decreasing the demand for diesel fuel) while heating oil demand is over. I am expecting crude oil stocks to increase by about 0.7 million barrels. If the actual numbers are in sync with my projections the year over year surplus of crude oil will come in around 9.4 million barrels while the overhang versus the five year average for the same week will widen to around 32.4 million barrels.

I am also expecting a modest build in crude oil stocks in Cushing, Ok as the Seaway pipeline did start pumping but it was not at capacity during the inventory report period. This would be bullish for the Brent/WTI spread in the short term which is still trading around the $15.50/bbl premium to Brent level for the last few days. That said I am still of the view that the spread will begin the process of normalization over the next 3 to 6 months.

With refinery runs expected to increase by 0.2% I am expecting a small build in distillate stocks. Gasoline stocks are expected to decrease by just 0.2 million barrels which would result in the gasoline year over year deficit coming in around 11.5 million barrels while the deficit versus the five year average for the same week will come in around 33.9 million barrels.  

Distillate fuel is projected to increase by 0.2 million barrels. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 20.4 million barrels below last year while the deficit versus the five year average will come in around 14.6 million barrels.

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