Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
Gasoline demand was one of the culprits in yesterday’s oil demise as demand slipped, causing problems for the Fed as Janet Yellen says all the pieces are in place for inflation. Yet the weakness in gasoline demand and economic data may suggest that we may be seeing some underlying softness in the economy. Now you might not think that if you look at the jobs reports and the help wanted ads but in general, the gasoline demand numbers don’t jive with a booming economy.
We were expecting to be seeing record demand but instead we are seeing contraction and that may help to explain weak retail numbers yesterday as well as lack luster inflation. We don’t see yet gasoline demand going and one might wonder about the health of the U.S. economy as gas demand is a leading economic indicator. The Energy Information Administration (EIA) reported that gasoline inventories increased by 2.096 million barrels last week against market expectations of a 1,150 million-barrel draw. Demand was down from last week and over the last four weeks, motor gasoline product supplied averaged over 9.5 million barrels per day, down by 1.2% from the same period last year.
Still the EIA reported crude oil inventories, provided many contradictions. The EIA reported that crude supply fell by 1.661 million barrels. Not as large as the 2.45 million barrels estimate but much larger than the American Petroleum Institute (API) that reported 2.750-million-barrel increase. In Cushing, Oklahoma though we had a drawdown of 1,156 million barrels as opposed to the API reported 833,000-barrel drop. Refinery demand was strong as crude oil refinery inputs averaged about 17.3 million barrels per day as refineries operated at 94.4% of their operable capacity last week.
Yet with weak gas demand and a negative report from the International Energy Agency, the mood was bad and it had a hard time seeing anything positive. Oil though, after falling, seemed to stop in mid air not wanting to take out 4413 July on the May 5th crash low giving the market a least a shot for a recovery or even a bottom. What makes this day even more intriguing is the fact that today is the July crude option expiration that could lead to some interesting moves.
That $44.00 low is also critical for U.S. shale producers. U.S. oil production did rise again last week by 20,000 barrels but we are already hearing from some producers that they may have to contract if prices fall much further. Oil hedges that allowed many shale producers to operate have expired so they are naked and exposed to further downside in the market place. Such is the fate of producers that add production of light condensate into an already oversupply market.
Yet heavier grades of crude should tighten further. Saudi Arabia is going to slow exports to the lowest levels in almost 30 years. U.S. imports last week averaged over 8.0 million barrels per day, down by 316,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.2 million barrels per day, 7.1% above the same four-week period last year.
The EIA also reported that, “For the first time, monthly electricity generation from wind and solar (including utility-scale plants and small-scale systems) exceeded 10% of total electricity generation in the United States, based on March data in EIA’s Electric Power Monthly. Electricity generation from both of these energy sources has grown with increases in wind and solar generating capacity. On an annual basis, wind and solar made up 7% of total U.S. electric generation in 2016. Based on seasonal patterns in recent years, electricity generation from wind and solar will probably exceed 10% of total U.S. generation again in April 2017, then fall to less than 10% in the summer months. Since 2014, when EIA first began estimating monthly, state-level electricity generation from small-scale solar photovoltaic systems, combined wind and solar generation has reached its highest level in either the spring or fall. Because these seasons are times of generally low electricity demand, combined wind and solar generation also reached its highest share of the U.S. total during these times of year.”
Questions? Ask Phil Flynn today at 312-264-4364
A Subsidiary of Price Holdings, Inc. – an Employee Owned Diversified Financial Services Firm. Member NIBA, NFA
Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses.
The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2017
Get the Power! The Power to Prosper is found only on the Fox Business Network! Call to get signed up for our upcoming gold report! Call me at 888-264-5665 or email me at firstname.lastname@example.org
SubscribeReceive daily summaries of all Market Insights blog posts.
Enter email below.
Most Recent Posts
- Morning Softs. 08/16/17
- U.S. plans sale from Strategic Petroleum Reserve
- Housing Starts and Permits & EIA Energy Stocks. The Corn & Ethanol Report 08/16/17
- Crude Draws Continue. The Energy Report 08/16/17
- Oil prices move lower on seasonal pressures
- Morning Grains. 08/15/17
- Morning Softs. 08/15/17
- Crop Progress Seen Unchanged. The Corn & Ethanol Report 08/15/17