The latest Platts survey is looking for a 1.7 million barrel build in crude oil stocks, a 700,000 barrel fall in distillate supplies, and a 2.1 million barrel gain in gasoline inventories. Our customary stab at the data would imply a crude oil stock build slightly larger than the market is looking for. Our numbers would also suggest a distillate stock increase in contrast to consensus expectations of a draw. Implied demand should rebound further from the previous week, but as much due to reversion of diesel demand to our expected mean as weather. NOAA reports that on a home oil furnace-weighted basis, last week was 6.1% colder than normal and 34.0% colder than last year, but thus far this winter we have observed a continue conservation/substitution effect. Nonetheless, refinery output plus imports can more than offset any incremental demand. For gasoline, we are looking for a stock build somewhat less than analysts’ expectations assuming steady supply and a recovery in implied demand.
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1343 GMT [Dow Jones] Brent crude’s strength could be undone by Hetco’s recent hoarding of North Sea Forties and Brent cargos for February loading, says Torbjorn Kjus at DnB NOR. With the contango for March-April Brent not wide enough to support offshore storage, the oil company will be forced to release the cargos at a time when the maintenance season in Europe kicks off and crude demand ebbs. “The barrels will be released in February when refineries are in maintenance and that will pressure Brent prices,” pushing them away from their $100/bbl target, he adds. ICE Feb Brent down 51c at $97.65/bbl. Nymex Feb crude down 52c at $90.34/bbl.
US Crude Oil Stocks – Up 3.53 MB
US Gasoline Stocks – Up 1.869 MB
US Distillate Stocks – Up .94 MB
The latest Platts survey is looking for a 2.2 million barrel draw in crude oil stocks, a 900,000 barrel gain in distillate supplies, and a 2.8 million barrel increase in gasoline inventories. Our stab at the numbers would suggest a modest rebuild in stocks, as would be customary. Some analysts are citing the discount of WTI to offshore crudes, therefore eliminating the arb incentive to bring in incremental imports, but this is misleading for two reasons. First, WTI is landlocked and Gulf Coast sour crudes such as Mars are actually selling at a premium to WTI, a reversal of the customary relationship and second, import levels are also a function of refiner tax strategies around this time, and not simply whether the arb is open or not. For distillate, we have been commenting recently about relatively weak implied demand, and NOAA reports that last week on a home oil furnace-weighted basis, temperatures were only modestly colder than normal. Adding up our components suggests a larger stock build than the market is looking for, even if demand rebounds to more than 3.8 MMB/D. For gasoline, assuming a modest recovery in implied demand from the previous week, stocks should have increased, but less than consensus expectations.
Hornsby Trading News
- Platts Energy Inventory Survey Plus Hornsby & Company Inventory Assessment – February 7th.
- US NATURAL GAS INVENTORY SURVEY: Draw Of 126 Bcf Expected – Dow Jones
- Weekly DOE Inventory Report – February 1st.
- API Inventory Report – January 31st.
- Platts Energy Inventory Survey Plus Hornsby & Company Inventory Assessment – January 31st.