Energy Report: On The Road And Air Again

On the road again. Oil bulls are on the road again, taking oil to where it's never been, I can't wait to get on the road again.

Oil bulls are back as strong oil demand numbers put bulls back in the driver's seat. Not only did we see encouraging data from the Energy Information Administration (EIA) but a report from the U.S. Department of Transportation that reported that for the first time since the COVID 19 pandemic started, more people are driving on highways than they were a year ago. Highway traffic is up 1% from a year ago and that reflects what should be improving trends that we have seen in the private gas demand forecast as well as improving trends from the EIA.

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Yet we’re not just on the roads. The EIA showed that jet fuel demand jumped to 1.358 million barrels up 96 from last week. That reflects reports of rising capacity at airports and by airlines. Vaccinated travelers are starting to take advantage of airfares and hotel deals for spring break signaling a lot of pent-up travel demand.  

This comes as the U.S. supply situation for petroleum is tightening significantly. The EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve (SPR) decreased by 5.9 million barrels from the previous week. The reason why I mention the SPR is there was a release from SPR of over 1 million barrels. Even with that release, crude supplies have fallen to 492.4 million barrels. U.S. crude oil supplies are just 1% above the five-year average for this time of year. 

If you think that seems tight, take a look at the gasoline supply. The EIA says that total motor gasoline inventories increased by 0.3 million barrels last week yet are still 2% below the five-year average for this time of year.

Distillate fuel inventories decreased by 2.1 million barrels last week and are about 4% above the 5 year average for this time of yet we saw a big uptick in demand not only in jet fuel but from farmers buying their diesel for planting, assuming they can get in the fields. Overall total commercial petroleum inventories decreased by 9.1 million barrels last week that set the stage for yesterday’s sharp rally and new highs since the corrective breakdown in March. Energy watcher Pat Bourque, who correctly called these weeks to draw, is calling for even larger draws in the weeks ahead.

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