Oil waits on Fed as geopolitical risks demand attention

With refinery runs expected to decrease by 0.2% I am expecting a small draw in gasoline stocks. Gasoline stocks are expected to decrease by 0.1 million barrels which would result in the gasoline year over year surplus coming in around 3 million barrels while the surplus versus the five year average for the same week will come in around 5.2 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 million barrels below last year while the deficit versus the five year average will come in around 15.2 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. 

I am maintaining my view at neutral and keeping my bias at cautiously bullish even though the current fundamentals are still biased to the bearish side. However, the technicals and forward fundamentals are suggesting that the market could be setting up for a continued move to the upside now that the spot WTI contract has breached its upper resistance level once again. That said I am raising the caution flag that an equity market correction will impact oil prices in much the same way... round of profit taking selling.

I am moving my Nat Gas view and bias to cautiously bearish as the weather forecasts and nearby temperatures remain bearish. 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 at the moment.

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

Best Regards,

Dominick A. Chirichella

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