Afternoon Market Overview

The API started the weekly inventory report cycle with a mixed inventory snapshot.

Crude oil showed a surprise build in inventory after ten weeks in a row of drawdowns. Gasoline stocks built more than expected and distillate fuel inventories declined more than the expectations. The total combined inventories of crude oil and products were modestly higher on the week.

Overall the market added to its intraday losses after the report was issued. The API reported US crude oil stocks increased by 3.2 million barrels on the week. Cushing crude oil stocks decreased by 2.4 million barrels. They also reported a 4.1 million bbl draw in distillate fuel inventories and a 2.7 million bbl build in gasoline stocks. Total combined inventories of crude oil and refined products were modestly higher for the week and outside the range of market expectations.

We are expecting small draw in US crude oil inventories, a small draw in distillate fuel stocks due to the weather and a build in gasoline inventories. We are expecting total combined crude and refined product inventories to show a small draw in this week’s report. We are expecting crude oil stocks to decrease by about 1.2 million barrels.

If the actual numbers are in sync with our projection the year over year comparison for crude oil will now show a deficit of 84.4 million barrels while the overhang versus the five-year average for the same week will come in around 10.6 million barrels.

Canadian imports into the US for the week ending Jan 19 decreased by 580,000 bpd to 3.0445mn bpd and are now 590,000 bpd below the previous all-time record-high reached early in 2017, per the U.S. Energy Information Agency. With refinery runs expected to decrease (by around 0.6 percent) We are still expecting a build in gasoline stocks. Gasoline stocks are expected to increase by 1.8 million barrels which would result in the gasoline year over year deficit coming in around 11.3 million barrels while the surplus versus the five-year average for the same week will come in around 3.7 million barrels.

Distillate inventories are projected to decrease by 0.9 million barrels on the week. If the actual EIA data is in sync with our distillate fuel projection inventories versus last year will likely now be about 31.8 million barrels below last year while the deficit versus the five-year average will come in around 2.2 million barrels.