Oil balancing weakening demand with accommodative policies

The entire oil complex is in negative territory heading into the EIA oil inventory report to be released at 10:30 AM EST on Wednesday. The market is usually cautious on trading on the API report and prefers to wait for the more widely watched EIA report due out this morning.  The API reported PADD 2 stocks were slightly lower while Cushing stock increased by 0.471 million barrels. On the week gasoline stocks increased by about 3 million barrels while distillate fuel stocks increased by about 0.5 million barrels. 

My projections for this week’s inventory report are summarized in the following table. I am expecting a small draw in crude oil inventories, a modest build in distillate fuel... as many areas of the US returned to spring like temperatures during the report period... and a small draw in gasoline stocks ahead of the first weekend of the so called driving season in the US.

I am expecting crude oil stocks to decrease by about 0.3 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 12.1 million barrels while the overhang versus the five year average for the same week will come in around 33.1 million barrels.

I am expecting crude oil stocks in Cushing, Ok to be about unchanged… possible even showing a slight draw even as the Pegasus pipeline has remained shut down for all of the report period. This will be neutral for the Brent/WTI spread but as discussed in detail above other factors are in play that are pushing the spread back into a narrowing trend. 

With refinery runs expected to increase by 0.3 percent I am expecting a small draw in gasoline stocks. Gasoline stocks are expected to decrease by 0.5 million barrels which would result in the gasoline year over year surplus of around 16.2 million barrels while the surplus versus the five year average for the same week will come in around 8.1 million barrels.

Distillate fuel is projected to increase by 1.1 million barrels. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 1.5 million barrels below last year while the deficit versus the five year average will come in around 12.8 million barrels.

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