Market Report & Analysis for 5/17/2018 Morning Edition
Morning Market Overview
After rising in a choppy trading session on Tuesday prices are starting the US trading session on Wednesday lower as the IEA issued a mixed forecast this morning.
The API issued their weekly inventory snapshot late yesterday afternoon showing across the board draws which was supportive for oil prices. This morning the EIA will release their more widely followed inventory snapshot at 10:30 AM. Yesterday afternoon the API started the weekly inventory report cycle with a larger than expected draw in crude oil and gasoline stocks, with distillate fuel inventories declining less than the market expectations Total combined inventories of crude oil and products were strongly lower on the week.
Overall the market is not being impacted since the report was issued as other drivers are in the forefront. The API reported US crude oil stocks decreased by 4.9 million barrels on the week. Cushing crude oil stocks increased by 62,000 barrels. They also reported a 0.8 million bbl draw in distillate fuel inventories and a 3.4 million bbl decline in gasoline stocks. Total combined inventories of crude oil and refined products were lower for the week and outside the range of market expectations. Crude oil stocks likely decreased as refiner demand for crude oil increased while refined product inventories are projected to decline in this week’s report.
Our projections for this week’s inventory report are expecting a draw in US crude oil inventories, a draw in distillate fuel stocks and in gasoline inventories even as refinery runs likely increased. We are expecting total combined crude and refined product inventories to decline modestly in this week’s report. We are expecting crude oil stocks to decrease by about 2.2 million barrels. If the actual numbers are in sync with our projection the year over year deficit versus last year will widen to 89.2 million bbls while the comparison to the five-year average will now show a deficit of 11.5 million bbls. Canadian imports into the US for the week ending May 4 decreased by 75,000 bpd to 3.650mn bpd and are now 15,000 bpd above the previous all-time record- high reached early in 2017, per the U.S. Energy Information Agency.
With refinery runs expected to increase (around 0.4 percent) we are expecting a draw in gasoline stocks. Gasoline stocks are expected to decrease by 1 million barrels which would result in the gasoline year over year surplus coming in around 5.9 million bbls while the surplus versus the five-year average for the same week will narrow to 7.7 million bbls. Distillate inventories are projected to decrease by 0.5 million barrels on the week.
If the actual EIA data is in sync with our distillate fuel projection inventories versus last year will likely still be well below last year by 32.3 million bbls while the deficit versus the five-year average will widen to 26.6 million bbls.