Posted in: Forecasts,
by Patrick DeHaan on Jan 27, 2010 02:52 PM
The DOE again reported a gain in gasoline inventories in its weekly Petroleum Status report issued this morning. For the week ending January 22, gasoline inventories posted a two million barrel increase to stand at 229.4 million barrels, a six percent gain over a year ago. Oil inventories dropped by 3.9 million barrels to stand at 326.7 million barrels, a five percent decrease over a year ago.
Looking at economic indicating distillate inventories, we saw a 400,000 barrel increase, leaving stocks at a plentiful 157.5 million barrels, a rise of nine percent versus a year ago. Distillate is considered a leading economic indicator because it is used for construction, heavy industry, and heating, all factors that reflect how healthy the economy is.
Looking at the bigger picture, gasoline inventories are nearly at a record high in the Gulf region, and the Midwest also has ample supply. In the next few weeks, we may see gasoline inventories pose losses as refiners move to liquidate winter-spec, high RVP fuels. High RVP fuels are cheaper because they contain cheaper raw materials, such as butane. High RVP fuels typically result in more air pollution, and are only used in the coldest winter months, depending on location. In moderate climates (California, Texas, Florida, Arizona, etc), they will soon be producing lower RVP fuels. The fuel will likely take weeks to reach pumps.
As refiners prepare for summer driving season, we're also likely to see a handful of refinery malfunctions- refiners typically do maintenance before the summer to ensure their equipment can handle the production.
Likely as a result of today's DOE report, oil, gasoline, and distillate fuels are all trading lower. As we finish the week, areas of the Midwest that are seeing prices under $2.40 may see a price increase (Speedway States!) to adjust to making a profit. I've seen quite a few areas of the Midwest very competitive the last week, with some stations going as low as $2.29 just weeks after hitting $2.69 or more!
California will likely see little relief, if any as the week closes out. The Midwest and Gulf will continue to see the cheapest gasoline prices in the nation, and I wouldn't be surprised to see prices 4-7 cents lower this weekend.