With geopolitics the main oil price driver and the global economy and oil fundamentals a close second this week's oil inventory report may not be much of a price catalyst especially if the actual outcome is within the range of the industry projections.
My projections for this week’s inventory report are summarized in the following table. I am expecting the US refining sector to increase marginally as the refining sector continues to return to normal from the recent storm on the east coast. I am expecting a modest build in crude oil inventories, a build in gasoline and another draw in distillate fuel stocks as the weather was colder than normal over the east coast during the report period. 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 comparison for crude oil will now show a surplus of 46.3 million barrels while the overhang versus the five year average for the same week will come in around 44.8 million barrels.
I am expecting a modest draw in crude oil stocks in Cushing, Ok as the Seaway pipeline is still pumping and refinery run rates are continuing at high levels in that region of the US. This would normally be bearish for the Brent/WTI spread in the short term but the spread is currently trading at a relatively high premium to Brent but off of the highs hit about a week or so ago. The slow return from maintenance in the North Sea as well as the evolving situation in the Middle East have been the main drivers that have resulted in the Jan Brent/WTI spread still trading close to the $23/bbl level as of this writing. The widening of the spread should begin to ease once the North Sea returns to a more normal production level and the situation in the Middle East quiets down.
With refinery runs expected to increase by 0.2% I am expecting a build in gasoline stocks. Gasoline stocks are expected to increase by 1.0 million barrels which would result in the gasoline year over year deficit coming in around 6.7 million barrels while the deficit versus the five year average for the same week will come in around 2.1 million barrels.
Distillate fuel is projected to decrease by 0.8 million barrels. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 18.2 million barrels below last year while the deficit versus the five year average will come in around 28.4 million barrels.
The folowwing 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 directional sync with this week's projections (except for crude oil). As such if the actual data is in line with the projections there will be a modest change in the year over year inventory comparisons for crude oil.