Oil spreads may have peaked as Canada sends oil to Europe

Global equity market gave back some of last week's robust gains over the last 24 hours as shown in the EMI Global Equity table below. The Index lost almost 0.3% for the week resulting in the year to date gain narrowing to 2.4%. The big mover over the last 24 hours was the Japanese equity market, which was somewhat disappointed over the Bank of Japan's kicking the can down the road before starting its open ended easing program. The Japanese bourse has also been the main mover for most of this year but after last night's downward move it no longer holds the top spot in the Index. The London FTSE has now moved in to take control of the top spot with the U.S. Dow now in second place. Global equities have been a positive for the oil complex as well as the broader commodity markets throughout 2013 so far.

On the event front, the U.S. House of Representatives will vote today on raising the debt ceiling for a three month period of time to allow for the U.S. Senate to possibly pass its first budget in more than four years. As we saw at the end of 2012 we are back into the political brinkmanship mode with the short-term outcome likely to impact risk asset market volatility until the politicians finally agree on a lasting deal.

The weekly oil inventory cycle will begin one day late because of the holiday this week in the U.S. The weekly oil inventory cycle will begin with the release of the API inventory report on Wednesday afternoon and with the more widely followed EIA oil inventory report being released Thursday morning at 11 AM EST. With geopolitics still less of an issue or price driver than it was the last month or so, the main oil price drivers are likely to be any and all macroeconomic data on the global economy with oil fundamentals equally important. This week's oil inventory report could be a modest price catalyst, especially if the actual outcome is outside of the range of industry projections.

My projections for this week’s inventory report are summarized in the above table. I am expecting the U.S. refining sector to increase marginally. I am expecting a modest build in crude oil inventories after last week's modest inventory build, a build in gasoline and a small draw distillate fuel stocks as the weather was more winter like over the east coast during the report period. I am expecting crude oil stocks to increase by about 1.8 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 27.3 million barrels while the overhang versus the five year average for the same week will come in around 36.5 million barrels.

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