Crude inventories build, yet crude held surprisingly firm for much of the day before falling sharply after the security alert in Washington was resolved. Here’s the latest report, indicating continued increase in demand, and what appears to be a trend of increased reliance upon foreign (Canada, Mexico) suppliers of distilled products to make up for near maxed out refinery capacity.
Weekly Petroleum Status Report, Week ending May 6
U.S. crude oil refinery inputs averaged nearly 15.4 million barrels per day during the week ending May 6, down 26,000 barrels per day from the previous week’s average. Refineries operated at 91.8 percent of their operable capacity last week. Despite the slight decline in refinery inputs, gasoline production increased last week, averaging nearly 8.9 million barrels per day. Distillate fuel production rose slightly compared to the previous week, averaging nearly 4.1 million barrels per day.
U.S. crude oil imports averaged 10.0 million barrels per day last week, down 267,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 10.2 million barrels per day, which is 99,000 barrels per day more than averaged over the comparable four weeks last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1.1 million barrels per day, and for the fifth consecutive week, extended the longest streak ever in which gasoline imports have averaged at least 1 million barrels per day. Distillate fuel imports averaged 229,000 barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose by 2.7 million barrels from the previous week. At 329.7 million barrels, U.S. crude oil inventories are above the upper end of the average range for this time of year, and the highest since the end of March 2002. Total motor gasoline inventories inched up by 0.2 million barrels last week, putting them just below the upper end of the average range. Distillate fuel inventories rose by 1.7 million barrels last week, and are in the lower half of the average range for this time of year. Total commercial petroleum inventories rose by 6.9 million barrels last week, and remain in the upper half of the average range.
Total product supplied over the last four-week period has averaged over 20.4 million barrels per day, or 1.1 percent more than averaged over the same period last year. Over the last four weeks, motor gasoline demand has averaged nearly 9.2 million barrels per day, or 0.9 percent above the same period last year, while distillate fuel demand has averaged over 4.1 million barrels per day, or 1.4 percent above the same period last year. Kerosene-type jet fuel demand is up 5.0 percent over the last four weeks compared to the same four-week period last year.
Will higher prices engender reduction of demand? Every EIA weekly report I can remember in recent months has gasoline demand running at a 1 – 2% increase year over year. Some say the market is awash in oil, but lacking capacity – irrespective of this, demand continues to rise and the peak season (and hurricane season) is just around the corner.
Lets be clear here – we’ve no reason on the charts to believe a trend reversal is imminent, in fact, if anything the recent bounce to resistance provided a perfect opportunity to gain short exposure in the commodity (today), and to lighten up on energy holdings (over the last two days I’ve been issuing that warning and heeded it myself).
Crude – front month contract, daily chart
Sell off in crude and related stocks aside, there is a “surprise” up scenario, one which I am exploiting with an intraday purchase of ECA, and TLM. Here’s the scenario – a break of Wednesday’s high (51.95) sets up a bear flag trigger failure long setup. The safer strategy is to wait for indications tomorrow that crude is willing to at least make an attempt to rise to the 51.50 level again; the aggressive strategy was to buy as price pushed above the big dip immediately after the EIA report came out.
ECA:C (TSX) / ECA:NYSE
At 10:40am I opted for the latter, and believe my overnight risk is manageable. Am I confident this is a bottom in this stock or sector? No, not at all – its merely a good technical trade opportunity, but lets not forget its a counter-trend trade (long) in an established down trend.
Please remember the premise of this trade off the daily (whether entered today or tomorrow) requires that price make a fairly direct move up tomorrow, therefore a break of today’s low in CL or the individual stocks will see me exiting quickly. Keep an eye on today’s highs in your favourite energy stocks for potential long opportunities tomorrow.
05.05.11 14:31 #