Fun Week for the Inventory Report

First of all, we have the oil disaster unfolding before us out in the GOM. and we will finally start getting some kind of number associated with the lost production as well as the effects of the nearby pipeline that they had to shut down when this thing started to burn. We did not see it in last week's numbers but I think the domestic production will be down around 5.3 which is .1 mbpd less than it was.

No one is talking about it but the burning platform is only about 100 miles from the LOOP, and as that slick gets bigger and bigger, there will have to be some effects on the movements of tankers in this area.....Luckily the LOOP is farther west, and the current is pushing the slick east (toward Florida's pristine beaches) It is anyone's guess how big and deep this mess would have to be before they talk about shutting down the LOOP but if they do, we are talking about 3 mbpd not coming into the country via that path. I think about 1.4 mbpd typically comes in around Houston and the remaining roughly 1 mbpd elsewhere, just as a reference.

Secondly we have the issue of refinery utilization. We talked last week about the refiners now being up to 89 percent, which is as high as I thought they were going to be at the peak this year, but per the graph above, this is actually comparable to the pre-recession average, so that system is up and running at least for the moment. As a result we are going to have to see something approaching 15.3 crude oil inputs to refineries....

Thirdly, the driver behind the refiners gearing up is obviously this unleaded demand situation, which was up over 3% year on year, and not quite up to pre-recession levels but getting pretty close, I think. The archive of doom says that the 2008 products supplied for this week was 9.3 and we are talking about 9.2 as of last week....

So, assuming last week was not a blip we are looking at the potential for the crude oil inventory change being right about even and if the imports are not 10 mbpd we are talking about a drawdown, and that would really throw a bit of excitement into this marketplace which has seen 12 straight builds in inventory.

There is an underlying sub-plot on distillates: Unleaded demand has picked back up to the pre-recession levels, but diesel has not. You are going to see bigger and bigger builds in the distillate inventory because of this.


So, we will have to continue to watch the news and wait to see what happens but there may be some surprises on the report this week....

I see that the front contract is back up over 86. maybe you will see 90 in a few days.....More fun later..