Posted in: Forecasts,
by Patrick DeHaan on Feb 18, 2010 02:08 PM
Dismal demand, increasing inventories equals... HIGHER prices? Well it shouldn't- but since when has actual supply and demand dictated prices? It's been a while, unfortunately.
Just hours after the U.S. average for gasoline rose for the first time in weeks, the DOE issued its weekly report, and I was hoping for a great report. Well- there was some good news in the report, but it apparently wasn't enough to stop the rally in wholesale oil and gasoline prices. On to the report...
Last week crude inventories rose a pretty healthy amount- 3.1 million barrels. With the addition, stockpiles sit at 334.5 million barrels- above the average for this time of year, but well below where they were a year ago.
Gasoline stockpiles also advanced 1.7 million barrels, putting them above average, and higher than one year ago. Even against rising gasoline inventories, wholesale prices have continue their rise today. At this writing, gasoline is trading 4-cents higher while oil moved above $78.
Meanwhile, demand for oil and gasoline continues to be lousy. Gasoline demand fell to just 8.5 million barrels last week, the lowest since January 2004. Meanwhile, the four week average continues to be just as meager, coming in at 8.6 million barrels, the lowest since February 2004. Compared against 2008, the demand we've been seeing is shocking- the same week in 2008 we saw demand over 9 million barrels per day, resulting in a drop of nearly 3 million barrels of demand per week, some 126 million gallons.
Distillate demand continues to paint a picture of a defunct economy as well. While inventories of distillates have fallen the majority of recent weeks, demand continues to be well under 4 million barrels per day. This compares to demand numbers over 4.7 million barrels per day in 2007, a drop of nearly 1 million barrels per day. This is a sign of a poor economy as distillate fuel is used not only to heat homes, but to power industry and construction equipment.
Look for stockpiles to drop in future weeks as well as we move towards Spring maintenance. We could see prices perk up a bit as refiners shut down (instead of idle) facilities this year.