We are at the halfway point to nowhere. Half of nothing is nothing. That pretty well sums up the forecasting accuracy if one were to use the tools available from the usually reliable sources, with the Energy Information Administration (EIA) heading up the list.
At the time of this report, the EIA data was delayed, so I am going on a wing and a prayer to make my deadline.
The current trend appears to support a guestimate of another increase in U.S. crude inventories, this is according to the secondary information source, the American Petroleum Institute (API). The inventory data provided by the API is voluntary, so the figures are at times self-serving and looked on by market traders with a jaundiced eye. The EIA numbers are mandated by the U.S. government so there is nowhere to hide.
Hide it and they will find it.
In fact, if we see another build in crude levels, this could be for two reasons: First, the Biden Administration has, for some reason, thought it a good idea to dip into the Strategic Petroleum Reserve (SPR) to stall any seasonal spike in pump prices. Second, with refiners in maintenance mode, they are signaling, “thanks but no thanks, we don’t want or need more crude.”
This attitude is further supported when we see that demand for gasoline and jet fuel is decreasing not increasing.
So, are there any factors that could force gasoline pump and wholesale diesel prices up?
The only one that I can see is Russia’s decision to cut crude production by 500,000 bpd in March. Then President Putin could say, “Nah! Let’s make that 560,000 bpd. This could be easily countered with a boost in shale oil production from the U.S. who can up production – seemingly overnight.
Then we have factors that figure into the hypothesis of the lowering of prices; and these are all based on the tenderness of the economy. The tug of war team of recession/inflation is winning with consumer demand and confidence pulling on the other end of the rope.
It is expected that the U.S. Federal Reserve will hike interest rates yet again to quell inflation.
This, folks, will shoot down demand, and the pricing balloon with it.
– Roger McKnight – B.Sc., Senior Petroleum Analyst
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