Friday May 6, 2016
Markets moved higher Wednesday morning mostly due to two items. The first was markets reacting to the prior days API release, which showed crude oil build below expectations. Second, wildfires in Canada had some in the market worried about potential threat to supply from the oil sands fields.
The price increased steadily throughout the morning, heading into the highly anticipated release of the Department of Energy's (DOE) weekly report. For the second straight week, the DOE and API reports on crude oil stocks varied substantially. Yesterday's report showed crude oil stocks had increased 2.8 million bbls the previous week, which was around 1.5 million more than the API report and above a Reuters poll for expected build. (DOE Details in lower section)
- Crude Oil Stocks: +2.8 million bbls
- Distillate Stocks: -1.3 million bbls
- Gasoline Stocks: +530,000 bbls
After the release, the futures market was weaker throughout the day. Front month WTI found a bottom around $43.25, repeating a low from the previous day. However, losses were mitigated going into the settle, as profit taking occurred after several down days in a row. As a result, June WTI and ULSD futures, eventually settle relatively flat.
Gasoline remained weak, as strong inventory levels exceeded another robust demand number. The Gulf Coast gasoline market was tuned into conflicting reports on the full return of Exxon's Baytown refiner. It was heard to be both restarting fully and running at reduced rates. Market participants will continue to track refinery outages as we gear up for the peak driving season.
- Refineries appear to be overcoming their issues as throughputs increased marginally for the week.
- Crude oil entering the refining process in the U.S. is down year-over-year from last year's elevated levels, everywhere but the West Coast.
- PADD III (Gulf Coast) has FCCU activity returning to the level of last year for the same week.
- Gasoline production for the country as a whole has risen back to a level we haven't seen since February.
- Distillate fuels production continued its decline, falling seven percent over the last six weeks.
- Commercial crude oil stocks surprised to the upside, by doubling the average polled expectation from the market.
- The average demand of distillate fuels, combined with a declining production level, has given way to further declines of the inventory levels.
- The total distillate stock level remains well north (over 10-million barrels) above the high point for the same week from the last five years.
- Despite the increase in implied gasoline demand, the increased production and high level of imports continue to fuel the glut.
- Gasoline stocks typically see a small bump around this time of year, and then promptly resume the decline before leveling out through the summer.
Published by PAPCO, Inc. (PAPCO)
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