Dennis K. Burke, Inc. Market Updates

EIA Long Term Projections Dampen Inventory Effects

Written by Kelly Burke | Oct 12, 2017 6:57:45 PM

 

WTI was in the red today ahead of the EIA inventory report.

API projections were that Crude would show builds of 3.1mmb - of note on this is API was an outlier of sorts, Platts forecasted draws of 400K barrels ahead of the official reporting.

Internationally, IEA Forecasts for global oil demand growth remained at 1.6m bpd, so flat demand growth amid the continued oversupply that doesnt seem to have much of an end in sight, long term picture wise. 

Anyhow, the official EIA report showed a draw down in Crude of 2.8mmb for the week ending 10/6. Gasoline was up 2.5mmb and distillates were down 1.5mmb. Gasoline had been projected to be down 1.4mmb, so the drop off we saw on gasoline today makes sense given the actuals. 

Side note - the EIA Report showed builds in Nat Gas of 87 billion cubic feet, right in line with Platts projections. The market was essentially unchanged on the builds, presumably because it makes sense there would be a temporary bump in inventories given temperatures havent dropped off, so demand should be low.Usually in New England we are well into the battle to keep the heat off til November 1 by now - this year not so much. I still have my air conditioner in the window.  

Gulf Refineries are back online and at capacity after temporary shut downs for Hurricane Nate, which probably is a factor in pushing pricing down as well in the face of flat demand.

In addition to the U.S. being back fully functional, EIA forecasts put U.S. domestic crude production at 9.9mmb per day for 2018 which would be the highest on average in U.S. history. Continued domestic production is seen as being a factor that will offset moves by OPEC or other nations to push a pricing rally. Theoretically, a rally cannot be sustained long term globally if the U.S. keeps production levels rising. We'll have to wait and see on that. 

The official numbers we closed out at this afternoon were: ULSD 1.7655 (-.0206), Gas 1.5832 (-.0260) and Crude landed right around the benchmark at $50.60

Thats all for today!