Oil spreads may have peaked as Canada sends oil to Europe

I am expecting a small draw in crude oil stocks in Cushing, Ok as the Seaway pipeline has been has been running near its expanded capacity for most of the report period. This will be bearish for the Brent/WTI spread in the short term as the spread is currently trading at its lowest level since late September. The narrowing of the spread should gain a bit more momentum over the next month or so as discussed above.

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 8.9 million barrels while the surplus vs. the five-year average for the same week will come in around 11 million barrels. If the actual gasoline build is in sync with my projection gasoline stocks will have built by about 36 million barrels since November.

Distillate fuel is projected to decrease 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 13.6 million barrels below last year while the deficit vs. the five-year average will come in around 16.5 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 not in directional sync with this week's projections. As such if the actual data is in line with the projections there will be modest changes in the year over year inventory comparisons for just about everything in the complex. 

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