Phil Flynn wishes everyone a Happy Fourth of July and reminds us what it is all about.
The Fourth of July is usually a time of fireworks and parades and star-spangled activities. For energy traders, it is also the pinnacle of the U.S. summer driving season. Yet in these times of Covid-19 challenges, we saw a slowdown in weekly gasoline demand overshadowing what a global oil market that is showing visible signs of moving from an oversupplied market to an under supplied market is. A strong jobs report and expansion in U.S. manufacturing is showing U.S. oil demand prospects improving and should help support the petroleum price rebound. Nonfarm payrolls rose by 4.8 million in June, much better than the expected increase of 2.9 million, and a record month over month increase. Gas demand will come back even if this week’s holiday is a bit subdued.
The Energy Information Administration (EIA) reported what could be the first of many substantial U.S. crude oil inventory draw downs. The EIA showed that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 7.2 million barrels from the previous week. At 533.5 15% above the five-year average. Still, with reports that OPEC oil output hit a 30-year low and global demand, oil supplies are going to tighten.
Reuters reported that ‘Tens of millions of barrels of crude and oil products stored on tankers at sea due to the Coronavirus crisis are being sold, in a sign fuel demand is recovering as lock downs ease,’ shipping sources say. Fuel demand tumbled as much 30% from March to May, with some surplus stored at sea as land storage filled up. Crude held on tankers fell below 150 million barrels by the end of June, down from more than 180 million barrels in late April, IHS Market estimated. Refined products held on vessels dropped to 50 million barrels from a mid-May peak close to 75 million barrels, IHS said, adding gasoline stocks were the fastest to be offloaded. Clarkson’s Research estimated 218 million barrels of crude was held on tankers by June 26 from a peak of 290 million barrels in early May, while about 70.5 million barrels of oil products stored versus a May peak of 100 million barrels.
Still, even though gas demand slipped, so did gasoline supply. The EIA reported that Total motor gasoline inventories increased by 1.2 million barrels last week and are about 10% above the five-year average for this time of year. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories fell by 0.6 million barrels last week and are about 28% above the five-year average for this time of year.
The EIA also pointed out that: Overall energy consumption in the United States totaled 100 quadrillion British thermal units (Btu) in 2019, only slightly less than the record set in 2018 and the third-highest level of annual U.S. energy consumption ever. About 20% of U.S. energy consumption in 2019 came from sources other than fossil fuels. Several energy sources hit record consumption values in 2019, based on data in the U.S. Energy Information.”
As we have said, we think the U.S. Economy is going to have a strong comeback, and the economic data we have been getting has been backing that up. Oil demand should continue to rise, and supplies tighten, and the oil bull market is firmly intact.
The USA is still the greatest country on earth. The proclamation that: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
All men are created equal is in our creed. While the country has not always lived up to that creed, it is still the proclamation that we continue to strive for. The words in the Declaration of Independence is the reason that immigrants people come to the USA from all over the globe to get a taste of the American dream. While all of our founders like Thomas Jefferson have had serious flaws and the country from its inception was stained with the sin of slavery; the words that were written in our Declaration of Independence are a divinely inspired truth that still beats in the heart of humanity. To have a chance at life liberty and the pursuit of happiness is something we have in this country where in many places in the world they do not. While we may never achieve perfection, we as a free people should always strive for it. God Bless America. Happy Independence Day.
Trade strategy may be key to ride out the crazy moves that will come with the headlines so keep in touch with our daily analysis. Makes sure you are getting my Daily Trade Levels! Read Phil’s energy report at Price Futures Group. Twitter: @energyphilflynn | Facebook: Phil Flynn. Not a Subscriber but want to be? Here! I will be a speaker at the Money Show in Las Vegas! I look forward to seeing you there.
