Preparing for OPEC

Oil Outlooks

Although I think that I have the skill and wherewithal to make a play between Evelyn Waugh and myself at an OPEC meeting, I’ll skip the formalities. If you really are interested in such parody, I am sure watching Season One of “Lindsay” is a pretty close reinterpretation.

As for me, I’ll keep the teeming millions entertained in what is surely going to be a scintillating OPEC meeting on Wednesday. Like you never forget your first gray hair, one never forgets his first experience at an OPEC meeting. Once you get past the media circus that puts delegates into Justin Bieber status, you figure out the play.

Since I was working mostly as an analyst when I went to such things, I had a few of my own dalliances into the fray. Everyone wants to hear what the Oil Ministers have to say, but it’s just as important for the masses to hear what the analysts think about what was said.

EIA Guesstimates:

CRUDE -1.5M (NYMEX:CLN14)– This is going to be tricky and it’s part of the “new normal.”  In past years we’ve seen crude inventories start to build in June as refiners try to pad the coffers ahead of refining demand.  That increase in refining demand is not going to change, but what is different is refining margins.  It’s going to be hard to get refiners to leave the good profits on running domestic crudes and that domestic production keeps rising.  In an effort to keep getting high on our own supply, we back off on the imports again this week and keep drawing down on stocks that are still close to last year’s levels.

GASOLINE -1.0M (NYMEX:RBN14)– I guess this is why I get paid the big bucks…not.  This is another tough call, but we’re dealing with some of the same things as in crude; imports.  We had a strong show last week, but it’s not going to last as long as the WTI/Brent arb is not giving much way.  The ECB rate announcement is going to help refiners there find a little love, but that’s not going to happen all that soon.  Demand here in the U.S. is better than it’s been since 2009 and we think that we’re going to ratchet it up again this week.

DISTILLATE +1.0M – For what it’s worth, the demand here has been a lot higher than we expected.  Over the past four weeks demand has been 4.1M b/d and that’s about 7% higher than last year’s average for this time.  We have been seeing exports pick up this year and even more recently, the past few weeks.  That’s a relief because these builds would be a lot bigger the way these refineries are running high for gasoline.

UTILIZATION -0.5% - In what used to be an important number, it’s just like the oil trading markets now: sideways.  We are past the days of what matters, only what sells.

CUSHING -500K – A little issue down in the USGC last week has slowed the rates of flow from here, but we’re only weeks away from the addition of Seaway Twin.

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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