DOE Report- the good and the bad…

It’s Wednesday! I’m sure many of you know that means the Department of Energy releases its weekly petroleum report!

Lets take a peek at what this weeks report contained:

Well first, BP’s Toledo refinery came back online. This was echoed in the Midwest PADD numbers. The Midwest’s inventory of gasoline is at its largest number since the last week in June (over 49 million barrels!)

*Refiners are going backwards! Refinery utilization dropped again to 87.8%. Not sure why this dropped, but refiners should be coming OUT of maintenance, not slipping away back into it…
>We need this number to rise to over 90% very soon to dodge a huge Spring run-up in prices…

*Oil inventories dropped a whopping 7.6 million barrels.
>In the last 3 weeks, inventories have dropped over 16 million barrels. WOW. Do a conversion- thats 672 MILLION gallons of oil. HOWEVER, keep in mind that as we get closer to the end of the year, folks in the oil business are trying to draw down their stocks of oil (less tax to pay at the end of the year if you don’t have as much on hand). I’m not too worried about this huge drop, but keep this in mind- we’ve been “well above” the average range for oil the last few weeks- now all of a sudden we’re in the lower half of the average range for oil… no good.

*Gasoline stockpiles increased again… a 3 million barrel gain this week.
>In the last 2 weeks we’ve seen an increase of 7 million barrels. A nice build… we need more weeks like this where we have large builds in gasoline stocks. This news was semi-surprising because gasoline production dropped this past week. We’re now only down 1% compared to stockpiles last year. We sit on 205.2 million barrels of gasoline this week. We need this to hit 215 million barrels in a hurry to counter the Spring run up in prices.

*Distillate inventories (Diesel, heating oil) took a hit this week to the tune of 2.1 million barrels.
>Again- after being in the “above average” range for many weeks, distillate inventories have slipped into the “lower half” of the average range for this time of year. Look for diesel prices to continue their climb this winter. We’re now 8.8% lower on distillate inventories compared to last year. Thus the large increase for the fuel compared to last year. This pain will not ease anytime soon.

*Demand is essentially flat for many products
>MasterCard is reporting lower demand, while the DOE reports the smallest increase. I tend to side with the DOE. Demand is up .9 percent across the board, with a 0.3 increase in gasoline demand, a 4.3% increase in distillates, and a 1.5% decrease in jet fuel.

Bottom line: oil prices may climb today as traders digest this latest news, but they have to have bearish news on the top of their heads. Look for oil to trade higer, then come down as they realize that the all important gain in gasoline is the big deal. Today’s market will set tomorrow’s price, so stay tuned here for further updates.

I would hold off on filling up for now, I don’t believe this report is bad enough to warrant an immediate hike.

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