Big shift coming for crude?

Oil Outlooks

In honor of the holiday markets that are starting a week early, I'm going to use this time wisely to make everything short and simple.

  • MYTH: Gasoline prices are being affected by the crisis in Iraq.
  • TRUTH: In the last 12 months we’ve added 2.6M in Non Farm Payrolls and have averaged 16M auto sales every month. More workers, more cars...umm, more demand.
  • MYTH: Iraqi oil is at risk and we may lose production if the insurgents continue to move further south.
  • TRUTH: This isn’t 2003 and we should know now that after the Baiji refinery incident that the rebels have no intention of harming production. They made a concerted effort to not kill any workers or harm the units. This is not a movement that wants to stop oil production, they want to take over the revenues and distribute them as they see fit.

EIA Guesstimates

CRUDE (NYMEX:CLM14) +2.0M - There’s about to be a big shift here and it’s going to hopefully put all those people over thinking the Iraq situation. Of course it might only be temporary once we get to the Seaway Twin opening, but that’s not here nor there for these stats.

We’re looking at a little bit of a back up because of the pipeline issues on Keystone South and continued struggles of refineries down in the U.S. Gulf. We also think that we’re going to see a little bit of a bump up on imports this week to add to our supply.

GASOLINE (NYMEX:RBM14) -1.5M – The good thing here is that we think the late inventory reports is going to help balance out the draws ahead of the holiday. I like to think the bulk will be this week, but expect a similar number next week to keep the out flow heading to the consumer. Take this as a sign though that supply is not going to see massive builds the rest of summer and we’ll likely see prices increase as supply tapers into July.

DISTILLATE -500K – Not a lot of love here for the producers. We’re not going to be able to get production over our tipping point of 5M b/d and that’s going to be a problem with a little better demand. We might start to see some exports rise here if we have caught the Brent in an uncompromising position for EU refiners.

UTILIZATION -1.0% - Can’t believe this is actually after the maintenance season, but we’re not doing so well keeping the refining system running as well as we did during turnarounds.

CUSHING +1.0M – Take it for what you will, but as the pipelines were delayed, is as much as the pipelines are coming back and with a vengeance called 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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