The Energy Report 01/10/19

Build That Wall

While we might not get a wall on our southern border, we are at least in the short term building a wall of petroleum products. Oil prices are back in a bull market as concerns about the global economy fade and OPEC production cuts start to bite. The oil and product market shook off a strange Energy Information Administration Supply (EIA) petroleum status report that showed astoundingly big builds in petroleum product supply even as crude supply fell. The traders assumed that the product builds were somewhat of an illusion and they had many theories as to why we saw this inexplicable increase in supply.

The EIA reported that  U.S. commercial crude oil inventories fell by 1.7 million barrels from the previous week. Yet the shock was that  gasoline inventories surged by 8.1 million barrels last week and are about 5% above the five-year average for this time of year. Distillate fuel inventories increased by 10.6 million barrels last week. Yet despite the spectacular rise are still  5% below the five-year average for this time of year. Total commercial petroleum inventories increased last week by 13.3 million barrels last week, an incredible jump but why?

Some suspect that we are seeing supply increases because many held off showing supply until the new tax year began. Others blamed weather and delays in the Houston shipping channel as more big tankers clog up the seaway. Some are blaming the strange numbers on the holiday.

Patrick Bourque, an independent analyst, reports that U.S. Customs is moving slow approving any foreign flagged ships entering or departing U.S. waters. Still, U.S. crude oil imports averaged 7.8 million barrels per day last week, up by 454,000 barrels per day from the previous week. But over the past four weeks, crude oil imports averaged about 7.6 million barrels per day, 3.6% less than the same four-week period last year. Total motor gasoline imports, (including both finished gasoline and gasoline blending components) last week averaged 550,000 barrels per day, and distillate fuel imports averaged 261,000 barrels per day.

The EIA says that total products demand was at 20.5 million barrels per day, down by 0.7% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.0 million barrels per day, down by 1.2% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the past four weeks, down by 1.3% from the same period last year mainly . Jet fuel product supplied was down 10.2% compared with the same four-week period last year.

Oil is really back in a bull market because the reasons for oil crashing into a bear market were flimsy at best. Now the price crash has enraged Saudi Arabia who will do whatever it takes to get oil to $80 and get help from a cut back in global energy investment.

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Phil Flynn

The PRICE Futures Group

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network

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