Oil waiting on Bernanke testimony, inventory confirmation

I am expecting crude oil stocks to decrease 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 deficit of 5 million barrels while the overhang versus the five year average for the same week will come in around 26.9 million barrels.

I am expecting crude oil stocks in Cushing, Ok to decrease this week and continue its destocking trend. This will be bearish for the Brent/WTI spread as the fundamentals are in play and are driving the spread (see above for a more detailed discussion).

With refinery runs expected to increase by 0.2 percent I still expecting a 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 14.6 million barrels while the surplus versus the five year average for the same week will come in around 7 million barrels.

Distillate fuel is projected to increase by 1.8 million barrels. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 2.1 million barrels above last year while the deficit versus the five year average will come in around 17.6 million barrels.

 

The above 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 mostly in directional sync with some differences compared to last year’s changes. As such if the actual data is in line with the projections there will be small changes in the year over year inventory comparisons for most everything in the complex.

I remain cautiously bullish for the overall oil complex. The overall oil fundamental picture is has been improving over the last several weeks and along with the changing view of how long QE3 may or may not last in the US is providing support to the oil complex on a macro basis.

I am maintaining my Nat Gas view at neutral and my bias at neutral based on a less supportive short term temperature forecast. The fundamental picture could begin to shift if the temperatures do not remain above normal on both coasts.  

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

Best Regards,

Dominick A. Chirichella

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