EIA expects oil production to outpace consumption in 2013 and 2014

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 million barrels which would result in the gasoline year over year surplus coming in around 6.5 million barrels while the surplus versus the five year average for the same week will come in around 11.5 million barrels.  

Distillate fuel is projected to increase by 1.5 million barrels. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 18.1 million barrels below last year while the deficit versus the five year average will come in around 17.1 million barrels.

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 directional sync with this week's projections. As such if the actual data is in line with the projections there will be only small changes in the year over year inventory comparisons for just about everything in the complex. 

I am maintaining my view at neutral and keeping my bias also at neutral as the current fundamentals are still biased to the bearish side. However, the technicals are still suggesting that the market could be setting up for a breakout move to the upside as both WTI and Brent are hovering near the channel upside breakout level. There is still no shortage of oil anyplace in the world and a portion of the risk premium from the evolving geopolitics of the Middle East is continuing to slowly recede from the price of oil.

I am maintaining my Nat Gas view at cautiously bearish as the fundamentals and technicals are now suggesting that the market may be heading lower for the short term. I anticipate that the market is now positioned to possibly test the $3/mmbtu support level if the actual temperatures are in sync with the latest NOAA forecasts. As I have been discussing for weeks the direction of Nat Gas prices are primarily dependent on the actual and forecasted weather pattern now that we are in the heart of the winter heating season and currently those forecasts are bearish.

Markets are mostly lower heading into the US trading session as shown in the following table.

Best Regards,

Dominick A. Chirichella

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