Oil expects bearish inventories as OPEC sees little growth in 2013

My projections for this week’s inventory report are summarized in the above table. I am expecting the US refining sector to increase marginally as the refining sector continues to return to normal from maintenance. I am expecting a modest build in crude oil inventories after last week's modest inventory build, a build in gasoline and in distillate fuel stocks as the weather was still not winter like over the east coast during the report period. I am expecting crude oil stocks to increase by about 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 32.1 million barrels while the overhang versus the five year average for the same week will come in around 41 million barrels.

I am expecting a modest build in crude oil stocks in Cushing, Ok as the Seaway pipeline has been shut for most of the report period with the restart not coming until last Friday. This will be bullish for the Brent/WTI spread in the short term as the spread is currently trading at its lowest level since late October. 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 Brent/WTI spread still trading around the $17.75/bbl level as of this writing. The narrowing of the spread should begin to ease once the North Sea returns to a more normal production level, the situation in the Middle East quiets down and the expanded capacity of the Seaway pipeline starts flowing later this week.

With refinery runs expected to increase by 0.2% I am expecting a build in gasoline stocks. Gasoline stocks are expected to increase by 2 million barrels which would result in the gasoline year over year surplus coming in around 7.6 million barrels while the surplus versus the five year average for the same week will come in around 13.6 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 15.8 million barrels below last year while the deficit versus the five year average will come in around 17.4 million barrels.

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