Get ready for a massive crude oil supply build! There is nothing like a crude build to start the New Year! Well at least the first full trading week of the New Year. Last week traders were shocked at the Energy Information Agency when they reported that U.S. commercial crude oil inventories decreased by 11.1 million barrels from the previous week. Now normally a drawdown in supply of that magnitude would cause a major price spike but this time it was different. The main reason is because the bulk of the drawdown was in the Gulf Coast and it was the report that reflected the last week of the year. In other words, we should see supply rebound big time this week.
Even with the drop in supply, U.S. crude stocks stand at 359.9 million barrels, which is well above the five year average and near record supply in Cushing, Oklahoma, yet the price of oil continues to be strong. As the market prepares for the reversal of the Seaway Pipeline, the WTI will start to once again matter in the global marketplace. The great unwind between the WTI and Brent contract has begun!
At the same time the oil market continues to get a boost from the strong stock market. Global financial stimulus has made oil more valuable. This week good earnings could be a major factor adding to oil momentum. Of course the opposite is true if the earnings fail to inspire.
At the same time, U.S. refiners are working overtime to 90.4% of capacity. U.S. crude oil refinery inputs averaged more than 15.3 million barrels per day during the week ending Dec. 28, 13 thousand barrels per day above the previous week’s average. Total motor gasoline inventories increased by 2.6 million barrels last week and are well above the upper limit of the average range. And distillate fuel inventories increased by 4.6 million barrels last week but remained below the lower limit of the average range for this time of year.
This week look for crude supply to rebound by 5 million-barrels, look for refinery runs to drop by 0.5, and gas and distillate supply to rise by 2 million barrels.
Total products supplied over the last four-week period have averaged more than 19.1 million barrels per day, up by 3.1% from the same period last year. Over the last four weeks, motor gasoline product supplied has averaged about 8.6 million barrels per day, down by 2.3% from the same period last year. Distillate fuel product supplied has averaged just under 3.7 million barrels per day over the last four weeks, down by 6.4% from the same period last year. Jet fuel product supplied is 2.7% higher over the last four weeks compared to the same four-week period last year.