Gas Prices: Downturn accelerates!

Well, the DOE report was mixed: both good and bad.

The great news:
Refiners out did just about every prediction and utilized 90.4% of their capacity last week. Professional analysts expected refiners to use 88.7%, so this very much surprised them. I had predicted refiners to use up to 89.2% of their capacity so this too surprised me. Look for refiners to use around 91.3% next week.

Also good news (even though it may not seem so) was that there was a drawback in oil inventories. This signals to traders that refiners are demanding more oil to refine, signaling that they are ramping up production.

The not so great news:
Gasoline stockpiles still fell more than expected. Professional analysts were expecting a draw of 2.1mb, while a drop of 2.7mb is what occurred.
Midwest PADD storage fell to 47.3mb; however, I believe that major midwest players (Valero, BP, Exxon to name a few) are starting to ramp up production of our 7.8RVP gasoline. They are possibly still trying to get rid of all their winter gasoline, so look for next week’s DOE report to show a gain in Midwest PADD storage.

Gasoline is currently down to 2.02, but we shouldn’t see much of a loss or gain. If anything, I expect gasoline to have lose a fraction today. The news was both good in bad, keeping traders in check.

What’s this mean for us?
We might see higher rack prices due to lower PADD storage this week; we might see a small price hike to 2.82 or so, but the odds are only at about 40% for that to happen. Keep watching for prices to fall; we might get down to 2.67-2.69!

A brief note: think about this and answer to yourself: do you think so far in 2007 we’ve had MUCH HIGHER gas prices than the same period in 2006?
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If you answered {{{*$$y*$**$e$$***$$s$$*}}}, (I tried to hide the answer in case you scrolled too far) you’re incorrect. So far, price this year have averaged around 2.414 while last year that number was 2.410.

~Patrick

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