Fed Comments Worry Market
May 14th, 2020
The comments from Federal Reserve Chairman Jerome Powell were concerning to the market and created selling pressure. The worrisome outlook he gave for the economy and talk that more support would be needed to keep the economy going were enough to see energy prices pushed lower despite what many saw as a bullish inventory report.
The US Department of Energy Wednesday announced it will buy up to 1 million barrels of sweet crude oil for the Strategic Petroleum Reserve (SPR). The Energy Department said the purchase “will serve as a test” of the current conditions of the physical crude oil available to the SPR as opposed to the financial market trading WTI NYMEX futures contracts.
DOE inventory report said the crude oil stocks were down 75,000 barrels and the stocks at Cushing, Ok were down 3.002 million barrels. Gasoline stocks were done 3.51 million barrels and distillate stocks were up 3.51 million barrels. US production was down 300,000 bpd at 11.6 million bpd, and this was the sixth week in a row that production was down. Production is also at the lowest level since July 2019. The EIA added some bullish comments to yesterday report stating that they see fundamentals improving, with this comments; “we are seeing massive cuts in output from countries outside the OPEC+ agreement and faster than expected.
Propane stocks were up 2.541 million barrels putting total stock of propane at 59.376 million barrels compared with last year at this time stocks of 57.114 million barrels. Midwest stocks were up 891,000 barrels putting total stocks at 11.988 million barrels. Gulf Coast stocks were up 1.186 million barrels putting total stock at 41.124 million barrels. Propane production was done 100,000 bpd to below 2.0 million bpd for the first time since April 2019.
Saudi Arabia’s Energy Minister, Price Abdulaziz bin Salman, and Russia’s Energy Minister, Alexander Novak, held a phone conversation as part of their continuing consultations on oil market developments. They stated that both countries remain firmly committed to achieving market stability and expediting rebalancing of the oil markets.
EIA reported on 5-13-2020 that total US gasoline product supplied(implied demand) rose by 734,000 bpd up to a total of 7.398 million bpd for the week ending May 8th. US gasoline implied demand is down by 33% over the past 4-weeks versus last year and down by 14.6% based upon a cumulative daily average versus last year. The total distillated product supplied (implied demand) rose by 689,000 bpd up to a total of 3.818 million bpd for the week ending May 8th. US distillate demand is now down by 17.3% over the past 4-weeks versus last year and down by 9.1% based upon a cumulative daily average versus last year. Gasoline demand over the last two weeks has been improving and getting some attention in headlines but the numbers above which compare it to last year show that despite the improvements the market has a long way to go to get back to pre-coronavirus levels. Gasoline demand has come back at 7.8 million bpd up 2.5 million bpd in the last two weeks. JP Morgan forecast that they see the uptrend in gasoline demand continue and to see gasoline demand reach 8.9 million bpd in the summer, which would represent about 800,000 bpd losses year on year.