Oil focuses on inventories while waiting for Isaac to pass

My projections for this week’s inventory report are summarized in the following table. I am expecting the US refining sector to throttle back runs this week...most likely still a result of the unscheduled shutdowns (not related to Isaac) over the last couple of weeks or so. I am expecting a modest draw in crude oil inventories a draw in gasoline and a small seasonal build in distillate fuel stocks as the summer driving season is just about over. I am expecting crude oil stocks to decrease by about 1.8 million barrels. If the actual numbers are in sync with my projections the year over year surplus of crude oil will come in around 1.9 million barrels while the overhang versus the five year average for the same week will come in around 18.6 million barrels.

I am expecting a modest draw in crude oil stocks in Cushing, Ok as the Seaway pipeline is now pumping and refinery run rates are continuing at high levels in that region of the US. This would be bearish for the Brent/WTI spread in the short term which is now trading around the $16.50/bbl premium to Brent level. I am still of the view that the spread will continue the process of normalization over the next 6 months.

With refinery runs expected to decrease by 0.3% I am expecting a modest draw in gasoline stocks. Gasoline stocks are expected to decrease by 1 million barrels which would result in the gasoline year over year deficit coming in around 6.9 million barrels while the deficit versus the five year average for the same week will come in around 3.7 million barrels.  

Distillate fuel is projected to increase by 0.5 million barrels. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 30.4 million barrels below last year while the deficit versus the five year average will come in around 25.7 million barrels. Exports of distillate fuel have been the main storyline this year with exports running around 1 million bpd.

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's inventories are mostly in the same direction as the projections. As such if the actual data is in line with the projections there will only be a modest change in the year over year comparisons for most of the complex...mostly on the crude oil side. 

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