Commodity Market Update June 21, 2019
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June 21, 2019 | by Joel Fingerman
Energia
Recently crude prices have dramatically moved because of news reports rather than fundamentals. There is a sensitive balance between the bearish risks from global demand slowdown and oversupply, and the bullish risks from possible supply disruptions in the Middle East and US-China trade war issues. However, it is still useful to review some of the recent crude oil and gasoline supply/demand data.
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The latest EIA data release reported total crude stocks at 482.4 million barrels for the week ending June 14, a counter-seasonal string of increases since early March totaling 42.4 million barrels (Chart 1, black line).
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Considering crude oil and petroleum products together, there has been a 92 million barrel increase in total stocks since last March (Chart 2, black line).
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Crude runs are ramping up for summer driving season, with the latest at 17.26 million barrels per day (Chart 3, black line).
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Normalizing crude stocks by dividing by crude runs per day creates current days forward supply, which is 28.5 days (Chart 4, black line). Notice the jump in September 2017 during the hurricanes of Harvey and Irma when offshore platforms were evacuated and crude runs curtailed (Chart 4, blue line).
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When plotting crude price with days forward supply, the relationship is not always inverse, but, in general, large days forward supply pressures prices downward (Chart 5).
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Considering gasoline supply, we see during this summer driving season several weeks of counter-seasonal increases in gasoline stocks, up 8.3 million barrels in the last 5 weeks (Chart 6, black line).
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And the latest gasoline implied demand at 11.5 million barrels a day (Chart 7, black line).
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Normalizing gasoline stocks by gasoline demand per day, gasoline days forward supply is 20.3 days, near the seasonal average of 21.5 (Chart 8, black line).
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There is an inverse relation between gasoline price and gasoline days forward supply (Chart 9). We expect the reducing gasoline days forward supply to pressure gasoline prices upward.
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Regards,
The Fundamental Analytics Team
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