First of all, since we're just two sleeps away...have a Merry Christmas from all the staff at GasBuddy! Be sure to drive safe and have a great time with friends and family.
Getting back to the subject- the DOE report! It would have been much nicer to enter into Christmas with a healthy DOE report, but unfortunately, we got the exact opposite.
In the final report released before the major U.S. holidays, the DOE report effectively gave new support for higher oil prices into the New Year as total oil inventories fell a combined 14.2 million barrels last week, a huge number.
While some of the number may represent oil companies reducing their on hand inventory of products before year end, it still is a high number and could easily push crude oil back towards the $77-$80 range. (READ MORE!)
Crude oil inventories fell nearly 5.0 million barrels last week, and now stand just 1.1% higher than a year ago. Gasoline inventories declined nearly 1 million barrels, and stand just 3.4% higher than a year ago. Distillate inventories fell 3.1 million barrels as cold weather increased demand for heating oil, and currently stand 14% higher than a year ago. It is noteworthy that while distillate is still 14% than last year, it has dropped from 38% higher just a few weeks ago.
Over the last few weeks distillate demand has seen quite a recovery, and has been averaging 200,000-400,000bpd better than in early fall, supporting the rest of the bullish movement. In early fall, it was hard for oil to move higher as distillate demand was very poor. Distillate oil typically is a good factor of economic growth- if distillate demand is poor, the economy is likely suffering.
It's also been interesting to see how the stronger dollar is playing less of a role today, almost ignored as oil prices climbed back above $75. The U.S. dollar is trading lower against the Euro today, which will likely make oil prices climb further.
In the near future I see U.S. retail prices rising 7-12 cents on average in the next month with oil prices keeping a range of $73-$80. What will 2010 bring? I'll address that in a future entry, and it may surprise you.