Alrighty everyone welcome back! Nick is out on vacation this week so this is Tavis Kilian filling in. It’s good to be back, and I think we should celebrate by dusting off one of the old recipes from yesteryear: The Hot Toddy!
This one is sure to warm you up during Denver’s cold snap. As always, it is never a good idea to drink alone, so send this report to one other friend who is interested in inventory data. Let’s dive in!
After last week’s massive build it is refreshing to see a 5.9 million barrel draw from the EIA’s data. They predicted a meager 1.7 million barrel drawdown, so it looks like Christmas came early.
The API had a much bleaker prediction with an essentially stagnant week, but even they were able to report a 3 million barrel drawdown. The Christmas season has often been a time of super volatile inventory changes, so keep your socks on through at least the first half of January.
As you might imagine, the SPR continued to release some oil into the markets. Another 3.6 million barrels were released. This leaves it at levels we haven’t seen since around Christmas time of 1983. The Biden administration has now announced plans to begin refilling the SPR now that oil prices are back in the 70s, but if the price continues to rise, the whole program will have been executed at a loss.
This new draw leaves the US still below the domestic crude inventory historical 5-year average, but we were already there to begin with. Should things continue like this, we may spend the early part of next year far below what we may have come to expect.
Commodities seem to have found some more strength as Zelenski visits the US and Putin claims he is ready to end the conflict with Ukraine. I am not confident enough to say war is brewing, but it certainly has more than a 0% chance of happening at this point. Other than that, cold weather continue to improve the demand for most hydrocarbons…
…but not in the case of natural gas who is sinking into year-long lows. The recent draw of natural gas from reserves was much smaller than anticipated which has scared some investors away. If the demand is smaller, the supply must be closer to significant. Natural gas has been exceedingly volatile lately, so don’t sleep on this commodity yet.
Folks across the country continue to rejoice as the US enters historically normal (relative to the last 5 years) levels of gasoline supply. The marginal increases in supply are accompanied by dramatic falls in gas prices.
The national average now sits at $3.101 which is a decrease of about 9 cents from last week. Hawaiians are close to paying less than $5 per gallon as the average falls to $5.096 per gallon, but are still far above the national average. It is no surprise that Texas has the cheapest gasoline at about $2.616 per gallon.
Distillate inventories are still a little lackluster as of late, but propane inventories continue to exceed expectations. Neither of these commodities is too far away from average given the current timeframes, but anything could change at the drop of a hat.
That is all we’ve got this week folks. Thanks again for stopping by for a drink. We at RARE PETRO wish you fun times with your families and loved ones as we embrace this new year. Cheers!
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