I am expecting crude oil stocks in Cushing, Ok to decrease modestly for the tenth week in a row and continue its destocking trend. This will be bearish for the Brent/WTI spread but with the geopolitical risk and supply interruptions in MENA Brent is still likely to widen versus WTI as the risk premium hits the Brent market more strongly.
With refinery runs expected to decrease by 0.2% I am expecting a draw in gasoline stocks. Gasoline stocks are expected to decrease by 0.2 million barrels which would result in the gasoline year over year surplus coming in around 21.1 million barrels while the surplus versus the five year average for the same week will come in around 13.4 million barrels. With the U.S. summer driving season now in the history books gasoline supplies are more than adequate going forward as total gasoline stocks remain well above both last year and the so called normal five year average.
Distillate fuel is projected to increase by 1.0 million barrels even as exports of distillate fuel out of the US Gulf remains robust. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 0.2 million barrels above last year while the deficit versus the five year average will come in around 22.4 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 the 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 everything in the complex.
I am keeping my oil view and bias at neutral as the market continues to focus on Syria and the plethora of supply interruptions around the world but the immediacy of Syria has eased over the last 24 hours. Currently market participants are now in a wait and see mode as they try to determine when an attack takes place and what will be the response.
I am maintaining my Nat Gas view at neutral and keeping my bias at cautiously bullish on what seems to be a changing weather pattern to a more supportive short term temperature forecast. The fundamental picture could once again shift if the temperatures across the US do actually move back to large areas of warmer than normal weather as the latest NOAA forecast is currently predicting.
Markets are mixed heading into the U.S. trading session as shown in the following table.
Dominick A. Chirichella