The world now has taken on the persona of Alfred E. Neuman. What, I worry? Forget about deflation and countries taking over countries and printing money unlike anything the world has seen before. There is nothing to see here. Keep on moving.
Oil (NYMEX:CLN14) is starting to roll lower as geopolitical risk fall as the gas flow in to Ukraine and the global economy has fallen into a zombie like apathy. Fear has taken a holiday and so you just smile with a blank stare and move on. A weak ADP jobs report and hanging around waiting for Mario Draghi to make his rate decision seems to be zapping the life of markets across the globe. Volume is drying up as deflationary pressures are rising and it is not likely that the ECB possible negative rate will shock Europe out of its deflationary apathy.
A weekly drop in demand for both gasoline and diesel also seemed to cool off oil market demand expectations that were elevated because of the strong four week moving average and a less than anticipated drop in Cushing oil supply. Over all the Energy Information Administration showed that U.S. commercial crude oil inventories fell by 3.4 million barrels from the previous week. Another big drop in Gulf Coast inventories and a drop in imports explained the drop. It seems that there is not a lot of incentive to import oil when the Gulf Coast is well supplied. Total motor gasoline inventories increased by 0.2 million barrels last week, and are in the middle of the average range.
Finished gasoline (NYMEX:RBN14) inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 2.0 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 3.7 million barrels last week and are in the middle of the average range. Total commercial petroleum inventories increased by 8.8 million barrels. Not the type of numbers that is getting this market exited to move higher at this point.
Yet where we may see some excitement in the energy sector is natural gas (NYMEX:NGN14). Today we get the EIA report and according to Reuters " U.S. utilities likely put 116 billion cubic feet of natural gas into underground storage caverns last week as utilities rebuild severely depleted heating supplies before next winter, a Reuters poll of analysts showed on Wednesday. A 116-bcf injection for the week ended May 30 would top the 114-bcf build seen last week, the 108-bcf build seen in the same week last year and the 93-bcf five-year average. If the forecast is right, it would be the seventh week in a row injections exceeded the five-year norm.
May is traditionally the biggest month for stock builds and additions over the last four weeks have exceeded the year ago and five-year average. Utilities have stockpiled 399 bcf of gas over the last four weeks, compared to 357 bcf in the same period in 2013 and 337 bcf for the five-year average.
Even with the 116-bcf forecast build, overall gas in storage will remain at an 11-year low for this time of year as utilities attempt to replace most of the record 3.0 trillion cubic feet of gas withdrawn from storage over the past winter to keep homes and businesses warm. That however would still be well below the 3.8 tcf five-year norm and would be the lowest amount of gas in storage at the start of a heating season since 2005.