If you’ve never heard of covid 19, then a bullish stance on crude oil would be a given. Global oil inventories are falling like a rock, dropping 15 million barrels last week or at a pace of 2 million barrels a day. The OPEC plus meeting, where the group is talking about delaying a production cut while U.S. oil demand hits the highest level in over a year, would give a bullish stance on oil. Add to that mix, an unseasonal uptick in gasoline demand to 9.572 million barrels a day. Plus, a potential large hurricane that could barrel right through production areas and into the heart of refinery row. Yet covid fears still weigh despite the current bullish fundamentals.
The Energy Information Administration reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.0 million barrels from the previous week. At 432.6 million barrels, U.S. crude oil inventories are about 6% below the five-year average for this time of year. Total motor gasoline inventories decreased by 2.2 million barrels last week and are about 3% below the five-year average for this time of year. Finished gasoline and blending components inventories both decreased last week. Distillate fuel inventories increased by 0.6 million barrels last week and are about 8% below the five-year average for this time of year. Propane/propylene inventories increased by 2.0 million barrels last week and are about 17% below the five-year average for this time of year. Total commercial petroleum inventories decreased by 4.8 million barrels last week.
The numbers, along with demand, were very supportive and tells a story that should see one of the tightest winter time supply situations we have seen in years. Still more talk of the Fed tapering is giving the dollar a boost and adding to the selling. James “Jim” Bullard is the president and CEO of the Federal Reserve Bank of St. Louis said this morning that, “we are getting more inflation than we expected. He downplayed the possibility that covid would cause a delay in tapering. That would suggest that Fed Chairman Jerome Powell would have to send a signal at Fridays Jackson Hole symposium. Unless he dodges questions like Joe Biden.
The Wall Street Journal reports that, “European air travel is finally returning, thanks to a barrage of cheap tickets from discount carriers and the relatively smooth rollout of a continent wide vaccination-certification system. Until just recently, U.S. and China domestic air-travel markets have been booming, with passengers taking advantage of what had been a fall in Covid-19 cases in both places. In the U.S., a robust vaccination drive also boosted traveler confidence.
Concerns that technically the market came back too fast from the 7-day swoon is also a concern. If oil holds the 100-day moving average of 6676, the price recovery should continue.
Natural gas production issues should support prices all winter. We see the natural gas report today.
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