Records are breaking in energy, but Hurricane Dorian may steal the thunder, writes Phil Flynn.
Trade hopes are up as Florida must start to batten down. Total petroleum demand on the U.S. system hit 30.541 million barrels a day, a record high, as gasoline demand hummed, hitting 9.9 million barrels a day, close to a record high. Oil exports rocked hitting 3.0 million barrels a day and the only reason oil prices didn’t soar even higher was due to a big jump in U.S. crude oil production, leaping to 12.5 million barrels a day. U.S. refining margins are strong, and refiners are running hard to respond to this record demand.
So, while you have some people trying to talk the economy into a recession, the evidence before us shows that we are far from it.
Unhappiness about the Trump hard core negotiating tactics are the biggest concern, but markets are up on reports that China blinked and failed to retaliate to the latest round of U.S. sanctions. This makes the U.S. data look even more bullish. “China has ample means for retaliation but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation of the trade war,” Ministry of Commerce spokesman Gao Feng told reporters in Beijing on Thursday. “China is lodging solemn representations with the U.S. on the matter.”
Yet even before you can focus on this piece of news and the bullish Energy Information Agency data, you have to consider that Hurricane Dorian could take the focus away from the solid oil demand fundamentals to the potential storm impact. Fox News is reporting that, “Puerto Rico and the U.S. Virgin Islands were breathing a huge sigh of relief Wednesday night as Hurricane Dorian swung away from them, resulting in far less damage than had been feared. But whether Florida will have similar luck remained doubtful, according to forecasters, who predict Dorian could hit the state hard – possibly at Category 3 strength. If the storm's current track holds, Dorian could be "the strongest hurricane to hit Central Florida in over 30 years," said Glenn Richards, meteorologist for FOX 35 in Orlando. "Hurricane-force sustained winds would be carried across the entire width of the state if the current forecast holds,” he warned.”
From what I understand, based on some of the current hurricane forecast models, the storm could cut across Florida from the East to the West and gain strength in the warm waters of the Gulf of Mexico. If that forecast holds true, it will have a major impact on the heart of the U.S. energy industry. The track has the storm potentially going into refinery row. It will slow U.S. oil exports and imports and we will likely start hearing very shortly about oil platforms getting shut down. In fact, it is possible, according to sources, that Hurricane Dorian could shut down the entire Gulf of Mexico's oil and gas operations, from east to west, and may even start today, earlier than normal. The reason is the bases where crews are off loaded are in the path of the storm. So, they must get them onshore and then have time for them to get out of the way of what could be a monster storm.
Back to the data. The EIA reported that U.S. commercial crude oil inventories fell by a whopping 10.0 million barrels from the previous week. At 427.8 million barrels, U.S. crude oil inventories are at the five-year average for this time of year. The EIA also added about 3.7 million barrels in upward adjustments that kept U.S. crude supply from falling below the normal average. Motor gasoline inventories decreased by 2.1 million barrels last week and are about 3% above the five-year average for this time of year. Finished gasoline inventories increased while blending component inventories decreased last week. Distillate fuel inventories decreased by 2.1 million barrels last week and are about 4% below the five-year average for this time of year.
Total product demand over the last four-week period averaged 21.7 million barrels per day, up by 2.3% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.8 million barrels per day, up by 2.4% from the same period last year. Distillate fuel product supplied averaged 3.9 million barrels per day over the past four weeks, down by 5.5% from the same period last year. Jet fuel product supplied was down 1.2% compared with the same four-week period.
We also get EIA natural gas data today and are looking for a 55 bcf injection.
We had a great response to our Money Show in San Francisco! Watch for our Videos! Thanks to all. Makes sure you are getting my Daily Trade Levels! Read Phil’s energy report at Price Futures Group. Twitter: @energyphilflynn | Facebook: Phil Flynn
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