Crude oil is still having a hard time finding its footing after the American Petroleum Institute reported a surprise increase in oil inventories, and the commodity world as we know it is crumbling all around us. Oil is trying to defend the $50 a barrel are--but as we get call on gold going to under $1,000 an ounce and industrial metals like platinum, iron ore and palladium get crushed--the deflationary mood is infecting oil demand optimism.
This, by the way, should be good. Not only did we see global oil demand rise by 1.6 million barrels a day in the first half of the year, which was twice as fast as we saw the last 4 years, but we got a report from the Department of Transportation that said that U.S. miles driven this year will smash an all-time record. Yet, that did not matter after the 2.2 million barrel crude build and 885k increase in Cushing, Okla.
The DOT showed that travel on all roads and streets changed by 2.7% (7.3 billion vehicle miles) for May 2015 as compared with May 2014. Travel for the month is estimated to be 275.1 billion vehicle miles. The seasonally adjusted vehicle miles traveled for May 2015 is 262.1 billion miles--a 3.4% (8.7 billion vehicle miles) increase over May 2014. It also represents a 0.2% change (0.6 billion vehicle miles) compared with April 2015. Cumulative Travel for 2015 changed by 3.4% (42.0 billion vehicle miles). The cumulative estimate for the year is 1261.5 billion vehicle miles of travel. U.S. Department of Transportation's Federal Highway Administration shows that Americans drove 987.8 billion miles in the first four months of the year, topping the previous record of 965.5 billion, which was set in April 2007.
Stil,l when it comes to diesel it seems that it is taking its toll on the products market. Reuter's reports that China's exports of diesel will reach their highest since at least 1999 this August, as its local market cannot absorb high output from refineries. They also report that OPEC kingpin Saudi Arabia has also been stepping up exports of diesel.
We still expect that oil is closer to a bottom! We are fending off seasonal weakness and an onslaught of outside factors they may have little impact on the underlying crude demand strength.