Oil Market Supply Woes “Likely Overstated”
June 22, 2023
The average estimates from the Bloomberg survey for today’s DOE government inventory update are looking for crude oil inventories to be up 18,000 barrels, gasoline up 215,000 and distillates up 426,000.
The API report had crude oil inventories down 1.246 million barrels, gasoline inventories up 2.935 million barrels and distillate inventories down 301,000 barrels.
Barclays in a research note to clients noted that overall, the oil markets are rightfully concerned about demand, but supply woes are “likely overstated.”
EOG Resources’ Chief Operating Officer, Lloyd Helms, expects oil markets to continue to tighten going forward. He said muted increases in US oil production and cuts by OPEC+ producing nations group will limit crude supply in the months ahead.
The EIA in a note yesterday stated the US refining capacity has increased by more than 100,000 bpd, reversing two years of declines. Daily crude oil refining capacity increased in 2022 to 18.1 million bpd.
The US dollar fell after Fed Chairman, Jerome Powell’s comment to congress yesterday. The market is now expecting 2 more interest rate hikes this year with 25 points each.
The average estimate for today’s propane inventory report is for inventors to be up 3 million barrels. The five-year average for this reporting week is a build of 2.498 million.
The longer that oil is locked in this very tight trading range the more dangerous the move will be when it finally breaks out either to the upside or the downside. If you think it’s going to break out to the downside you must believe that the economy is getting ready to collapse. On the flip side, if you believe the economy may hang in there, get ready for some of the tightest supplies we’ve seen in many years later in the year.