This Week’s Summary:
You’d think that with this being the peak of the spring refinery maintenance season that crude inventories would build. If refineries are running slower then less crude is being refined, and it goes into storage.
But the latest EIA report doesn’t support this theory with an anemic build of only 2.4 million bbls. Gasoline levels should also have increased due to the shoulder of the demand season.
Not so, as they fell – meaning the opposites win again.
With demand for all three transportation fuels in positive mode, I believe the traders are looking at the wrong indicator. The key storage and futures trading hub is in Cushing, OK where inventories are now at their lowest in four years, and there is no reason to believe that the trend will end. This goes for demand growth for refined products as well, not just in the U.S. but globally.
This leads me to conclude that the current lowering of pump prices is an anomaly, so enjoy the ride while you can because we may have a problem since Cushing is the end point for the NYH cash futures price for WTI.
With crude inventories falling at the hub, but demand for refined products going through the roof, the only way for prices to go in the immediate future is UP.
– Roger McKnight, Chief Petroleum Analyst