Crude's 'Costco effect'

EIA Guesstimates

What is going on in oil, everywhere from the commercial producers to the refiners to the consumers is something we are dubbing “the Costco effect.” This is when the people buying oil are buying it a price that seems so much lower because it’s being sold in a wholesale system. That in turn makes them feel like they are getting a deal because they are not purchasing as much as often. In real terms though, they are spending much more money on each purchase and in effect are increasing the inherent price of the commodity.  

EIA Guesstimates:

  • CRUDE (NYMEX:CLM14) -3.0M – I don’t usually swing big, but when I do I choose the last week of May. This extended maintenance season has gone on longer than American Idol and is getting as boring too. We think that not only do runs hit 16M b/d this week, we’re going to again see crude imports stay under 7M b/d. 
  • GASOLINE (NYMEX:RBM14) -1.5M – I’d like this number to come in large too, but I’, going to give production and imports the benefit of the doubt. We’ll get the lion’s share of production yield, but as the weather continues to heat up and kids wrap up school and head into summer break/vacation, we’re filling up the tanks. Look for imports to pick up the pace to the 700K b/d area and if not, then boom goes the dynamite.
  • DISTILLATE +1.5M – Again, I’d like to go bigger here to the plus side. At some point we’re going to get some painful pile ups because refineries just can’t keep running this high while demand stays this low. I think that the real issue that refineries are dealing with is not trying to accommodate the high supply of light sweet crude, it’s about trying to turn the yield from distillates back to gasoline.
  • UTILIZATION +1.0% - Oh yeah, it’s all about going big or going home this week. I feel more confident about these numbers because with Unemployment on Friday, nobody is going to care all that much about these anyway. 
  • CUSHING -1.5M – Well I have to stick to the normal somewhere along this week’s stats. The only thing I am going to say here is that we should be starting the countdown for Seaway Twin to start…30, 29, 28…
About the Author

Carl Larry is president of Oil Outlooks and Opinions LLC. Follow him on Twitter (@oiloutlooks) or on his website.

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