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Where’s the logic?
Oil industry logic (now there’s an oxymoron for you) says that with the very low temperatures experienced in the U.S. northeast over the last two weeks, inventories of distillates should have been severely drawn down especially when you consider that the refinery utilization figures were averaging 79.9% nationally, but less than 60% in the heating oil intensive northeast.
Sorry, just didn’t happen. In fact, inventories increased due to a lack of patience. The armada of fully loaded supertankers that have been wallowing off shore around the world have finally been given their sailing orders to head to port. The low temperatures in North America, Europe and China have increased both crude prices and refined product crack spreads. The owners of these floating inventories have no doubt looked at the demand numbers which are anaemic. The inventories, which are abundant and the economic forecasts, which are about as accurate as a coin toss. They have decided that now is as good a time as any to take their profits so imports of crude jumped 540,000 bpd versus the previous week while distillate imports almost quadrupled.
We are now in the middle of winter and sooner than you think attention will be turned to gasoline prices as the driver for diesel prices. As it stands now, we see no reason for the traditional spike in gasoline/diesel prices in early spring.
Why do we say this?
By: Roger McKnight, Senior Petroleum Advisor
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