Depleted Inventory Levels Are a Concern
October 13, 2022
The API inventory report released a day late due to the federal holiday on Monday. The report showed crude oil inventories up 7.1 million barrels, gasoline inventories up 2 and distillate stocks down 4.6 million barrels. The big build in crude is from the releases that have been coming from the SPR.
I have continued to say that inventories on the products, gasoline, and diesel, are low and are a concern as we go forward. But what has been happening with demand and what will happened with demand is a big question. I think most everyone would confess that their demand is off but that varies by where you are in the country. The other big question is the economy, and will there be a recession and if so, how minor, or major, and will that have impacted demand negatively.
The following is an excerpt from Reuters reporter John Kemp and is a particularly good summary of the current inventory situation and the concerns about that looking forward:
US petroleum inventories including the strategic reserve have depleted in 86 of the last 118 weeks by a total of 480 million barrels and are at the lowest seasonal level since 2004. This is even with record breaking SPR releases that are coming to an end more than likely. US distillate stocks have depleted 69 of the last 118 weeks by a total of 66 million barrels and are at the lowest seasonal level since weekly records began 1982. US distillate stocks at the end of July, the most recent monthly data available, were at the lowest seasonal level since 1996 and before that 1954. European distillate inventories have fallen by 122 million barrels over the last two years and are at the lowest seasonal level since 2002. Singapore distillate stocks have fallen by 9 million barrels since 2020 and are at the lowest seasonal level since 2006.
The average estimates for the DOE inventory report for today is crude up 1.429 million barrels, gasoline down 1.924 million and distillates down 1.604 million .
The September CPI year over year came in higher than expectations this morning, at 8.2% actual versus 8.1% expected. While CPI has trended down from an increase of 8.3% in August, 8.5% in July and 9.1% in June, the fact it came in above expectations has led to a sell off and market participants are now expecting a 75 basis point rate hike from the Fed in November.