Welcome back to another Thirsty Thursday, the most entertaining hydrocarbon inventory report on the internet! This week Nick is taking over to give an update on all the numbers you’ve been waiting for. This inventory should be sipped slow, steady, and neat, just like this week’s drink of choice; whiskey.
Now I know it’s relaxing to drink a glass of whiskey in peaceful solitary, however, just like this report, it’s better with a friend. So find your inventory/drinking buddy and get ready for this week’s numbers.
The most exciting time of the week has come again, the release of the EIA’s most recent inventory report. After last week’s drawdown of 3 million and a quarter barrels, it was hard to predict which way domestic inventories would go. The EIA thought a slight drawdown of nearly 1.5 million barrels was in order. They were off by more than double as this week’s drawdown was 3.3 million barrels; we’ll take it!
The API, on the other hand, expected the drawdown to be a lot less, half in fact, of what the EIA did at 0.6 million barrels. However, they reported a far different number too. Rather than a drawdown, the API reported a slight build of 0.6 million barrels.
The more than expected decline in inventories this week is a good sign of high demand for oil in the US, at least according to the EIA. The discrepancy between the reported values from the EIA and API is likely due to the way the data is collected. Since the EIA is a government organization, data surveys are required, but because the API is a private company, it relies on voluntary surveys for data collection.
The SPR continues it’s downward trend, reaching lows it hasn’t seen since the middle of 1985. Looking at the graph it is also pretty easy to see that the slope of the recent decline is the steepest it has ever been, oil is moving fast, and it isn’t flowing into the SPR.
Well last week’s increase was met by this weeks highs (highest since mid-March) before a net decrease, both Brent and WTI are down about $12-13 over the past week. Both are also down right around 3% over the past month. It can be difficult to pin down exactly what the reason for the volatility is, but right now it may have something to do with the upcoming OPEC+ during which strategies and plans will be discussed on how to increase oil extraction in many countries.
Natural gas continues to come down from some really high highs of $10 to less than $9 before settling at $9.25 most recently. Natural gas’s ceiling seems to be around $10, but it is still searching for its floor, which many hope we don’t find anytime soon.
While this report is focused on the US, it can be interesting to compare prices to other areas of the world. For natural gas prices the easy comparison lately has been to Europe. Prices across the ocean continue to be nine-fold of what they are here, however, there does seem to be a developing trend to cheaper gas. The benchmark over there is Dutch TTF natural gas, as seen above.
Gasoline is still becoming cheaper, the average dropped by 5 cents over the past week, a modest amount, but nonetheless, it means we’re all paying less to drive around. The EIA did note that this is the highest-priced gasoline has been leading up to labor day since 2014, so there is definitely some more room to fall. For the second week in a row, Hawaiians are paying the most to fuel up at $5.300 per gallon That’s a difference of $1.975 between Hawaii and the cheapest state to fill up; Arkansas, where it costs just $3.325 per gallon.
Distillates stocks continue to fight historical levels as the gap between actual and historical grows even wider. This is likely due to the high demand for distillates in the current business cycle, until business slows, distillates will continue to lag behind historical levels. Unlike distillates, propane trades just as expected based on its 5-yr range and continues to increase.
The energy commodity market has and likely always will be volatile, however, lately we have seen some of the sharpest shifts in history. We will hold our breath with you as we await what we hope will be one of the sharpest upward swing in history. Here’s to hoping, cheers!
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