Latest Market Commentary

December 12, 2019

The DOE report said that crude oil stocks we  up 820,000 barrels. This was a big surprise as the market was looking for a draw of over 2 million barrels. Crude stocks as Cushing, Ok were down a big 3.39 million barrels. Crude sold off after the release of the data as the build was a surprise. But the big decline in Cushing added a bit of support and the market took back roughly half of the sell off before the day was over.

Gasoline stock were up 5.41 million barrels and were under selling pressure after the release of the data. Distillate stocks were up 4.12 million barrels which also came under selling pressure after the release of the data.

Let me just say before I begin on the propane report that it was a bit weird this week and we will be looking for some adjustments to get it back in line next week. The Midwest had a draw to stocks of 1.052 million barrels putting total stocks at 21.025 million barrels. The Gulf Coast had a surprise build of 3.347 million barrels putting total stocks at 61.470 million barrels. Total US propane stocks sit at 93.5 million barrels a very ample supply. There is a lot of propane in the United States, but the challenge has been it is not in abundance supply were demand is heavy and in great need of propane. All pipelines are still on allocation, but it appears that available gallons are freeing up. With that being said we are not out of the woods for this winter by any chance. Do what you can to take advantage of this situation and fill up what you can. This would be al tanks, both MFA tanks and customer tanks.

Here are more of the numbers on propane that added to the confusion for this week’s report. Production was 2.423 million barrels up 165,000 bpd from last week, which was record production. The 1.7 million barrel build this time of year is also a rarity. The biggest change on the week was demand which was down a huge 1 million bpd from last week. We know that demand has been big as crop drying and cold temperatures have really pushed the system to keep up. Demand for crop dying has slowed and winter storms farther up north slowed or shut down harvest, but a million barrels per day decline is shocking. As I said there will be some type of adjustment in these numbers in the next week or coming weeks.

The Federal Reserve decided yesterday to leave the federal funds rate at 1.5% to 1.75% and offered a more upbeat view on the US economy, which may be more positive for oil demand. The Federal Reserve chair further noted that due to low inflation they do not currently expect to raise rates in 2020.

Tim Danze, MFA Oil Company Hedging Manager