Market Rides Optimism of US-Chinese Trade Progress
December 19th, 2019
The DOE inventory report showed that crude oil stocks were down 1.09 million barrels putting total stocks at 446.833 million barrels. Last year at this time total stocks were 441.457 so we are 5.376 million barrels ahead of last year. Cushing, the NYMEX WTI Crude Oil Futures contract delivery point, stocks were down 270,000 barrels putting total stocks at 40.164 million barrels, last year at this time total stocks were 40.492 million barrels putting stocks 328,000 barrels lower than last year at time. Total stocks at Cushing are at the lower end of the three-year average range.
Gasoline stocks were up 2.53 million barrels putting total stocks at 237.297 million barrels which is 7.194 million barrels more than last year at this time.
Distillates stock were up 1.51 million barrels putting total stocks at 125.096 million barrels which is 5.196 million barrels more than last year at this time. Distillate stocks have built over the last four weeks and have went from below the three-year average range into that average range and above last year. Low stocks level has been a concern for some time for me as we approach the implementation of the new IMO 2020 rules starting January 1 and the increase in demand as we get into spring. No one know how all this plays out but for the market historically this is a good time to look at some amount of conservative price protection as part of your overall strategy to level out your fuel cost for the next season.
RBC Capital Markets in a research note to clients this week, warned that oil prices could stagnate if trade progress did not translate into concrete economic growth. The market is riding on optimism from the phase one deal between China and the US and if that drags on the above note from RBC Capital Markets is very valid. The market needs some time to see how this phase one deal progress and unless real progress is made prices will pullback. The likely hood of a big sell off and downtrend in the market seems on the low side current but energy prices could continue to trade in their range for some time into next year. The market has been and is still not convicted as there are a lot of issues it is trying to sort out. I still feel like the US and China trade deal is the biggest factor for these market moving forward. If progress is made and the economy is growing prices are likely to move up and be at the top end of the range and if not, then they will be at the bottom of the trading range.
Propane inventory was down 2.540 million barrels putting total stocks at 90.960 million barrels. Stocks in the Midwest were done 551,000 barrels and Gulf Coast stocks were down 1.222 million barrels. Propane price have also continued to trade in a pretty tight range.