Anticipation

The daily oil charts seem to suggest that oil wants to breakout, but the anticipation of seasonal maintenance is making us wait. It is keeping us waiting. There are still fears of slowing demand, enhanced today by the European Commission which cut its growth forecasts for the euro region’s major economies to 1.5 percent this year from 2.1 percent in 2018. Yet, there are also concerns about the supply side as the political standoff in Venezuela does not look like it is getting settled anytime soon. Disputed Venezuelan President Nicolas Maduro’s regime is now blocking humanitarian aid because in a socialist system the rights of the state trump the rights of the individual. So, since Maduro fancies himself the leader of the state he thinks it is the state’s best interest to let the people starve and die of a disease. This ongoing dispute is now educating America about different blends of crude oil and why at least, at this point, the U.S. shale oil revolution is not the answer to all the oil market’s complexities. Oil also saw some pressure on reports that Libya’s largest oil field might be back in operation, but don’t count those barrels until they are pumped. Yet despite talk of slowing demand for oil, the Energy Information Administration (EIA) reported exactly the opposite. We also had a report from the Wall Street Journal that the nation’s railroads are not seeing any sign of a slowdown.

We can talk about the EIA headline numbers that on balance were very supportive. The EIA reported that crude oil inventories increased by 1.3 million barrels, led by a surge in Cushing Oklahoma supply that increased by a shocking 1.4 million barrels putting supply at the delivery hub at a 42.6 million barrels, a one year high.

Gasoline inventories though only increased by 0.5 million barrels last week, just 5% above the five-year average for this time of year.  Distillate fuel inventories, on the other hand, fell by 2.3 million barrels last week and are about 4% below the five-year average for this time of year. Distillates are going to become a problem if OPEC keeps cutting and Venezuelan oil is not going to be around. Total commercial petroleum inventories decreased last week by 3.4 million barrels.

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