Total US Crude Oil Stocks Drew Down Slightly Due To Lower Imports

The smaller-than-expected product draws, reported by the Department of Energy yesterday, seems to be what the headlines are pointing towards to explain yesterday’s rally in energy futures. However, the bump in refinery runs, particularly in the PADD 1 region (the delivery point of the NYMEX refined product contracts), suggest yesterday’s rally was primarily driven by the speculative traders, riding the momentum of a rally that started earlier this month. It wouldn’t be a surprise to see a net addition of long position put on by money managers on Monday’s Commitment of Traders report.

Total US crude oil stocks drew down slightly due to lower imports and increased exports and refinery runs. Diesel stocks stayed pat with rising imports offset by rising demand. Gasoline demand continues to recover from last month’s drop off but is still well below the 5-year average.

While there is no smoking gun on why US ethanol stocks have broken through the top end of its 5-year seasonal range, other than “we made more of it”, it will be interesting to see if the new rice export rules India imposed this week will have a more resounding impact on the global ethanol market. In semi-related news, Indonesia’s state-run energy company Pertamina has begun supplying gasoline with a 5% mixture of ethanol, made from sugar molasses.

How many ways can we express that it’s hot outside, and that isn’t good? The EIA published a report this morning illustrating how much more power is required to cool commercial buildings in hot vs cold weather. While 98% of the energy consumed in keeping our offices chilly is supplied by electricity with only a fraction of a fraction coming from petroleum products, further stressing some states’ energy grids may cause some plants to subsidize output deficits by burning natural gas or ULSD.

The three storm systems that addled the NOAA’s 7-day forecast just two days ago have all but dissipated, save for one area of intrigue that has a 40% chance of development in the next week. As of now, the potential storm looks like it will curve northward, potentially staying out to sea as we’ve seen prior storms do earlier this season. So far there has been no activity threatening the nation’s refining center in the Gulf Coast, but we are still about a month away from peak hurricane season.

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