Energy Prospectus

EIA's weekly report came out a day late because of the Memorial Day holiday.

The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 3.620 million barrels in the week ended May 25. Market analysts' had expected a crude-stock draw of just 0.400 million barrels, while the American Petroleum Institute late Wednesday reported a build of 1.001 million. < This is the second week in a row that the EIA and API reports for crude oil have gone in opposite directions. Remember that both agencies are just guessing anyway. They don't have gauges on the storage tanks.

Supplies at Cushing, Oklahoma, the key delivery point for NYMEX crude oil futures contracts, decreased by 0.556 million barrels last week, the EIA said. Total U.S. crude oil inventories stood at 434.5 million barrels as of last week, according to press release, which the EIA indicated was “in the lower half of the average range for this time of year”.

The report also showed that gasoline inventories increased by 0.534 million barrels compared to a build of 1.883 million the prior week, while distillate stockpiles rose by 0.634 million barrels compared to a draw of 0.951 million a week earlier. < Keep in mind that these builds are as of May 25, the day before the Memorial Day Holiday.

Why is the oil price down today?

President Donald Trump's administration imposed tariffs on steel and aluminum imports from the European Union, Canada, and Mexico Thursday, a move that could provoke retaliatory tariffs and inflame trans-Atlantic trade tensions.

Commerce Secretary Wilbur Ross said there will be a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum.

President Donald Trump announced the tariffs in March but the U.S. granted exemptions to the E.U., Canada, Mexico, and other U.S. allies.
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Trump likes to negotiate from a position of strength.

Getting into the details of the EIA weekly report:

> U.S. oil production increased 44,000 bbls per day < Keep in mind that this a pure Wild Ass Guess by EIA since they don't have actual production data for at least 90 days.
> Refinery Utilization increased by 2.1% to 93.9% processing 17,155,000 barrels per day (6,386,000 BOPD more than U.S. production). I am expecting utilization to go over 95% in June.
> Days of supply continue to tighten:
Crude oil = 26.0 days (down 0.4 days)
Gasoline = 24.2 days (down 0.4 days)
Jet Fuel = 23.4 days (down 0.5 days)
Distillates = 27.8 days (up 0.4 days)
We should have inventories of ~30 days of supply for all of this stuff. If a hurricane knocks out refining capacity like it did last summer, we'd see gasoline rationing across the U.S.

Except for the reported increase in U.S. oil production, the report looks quite bullish to me. I think today's decline in WTI is due to Trump's decision to slap tariffs on EU and Mexico. Investors, including commodity traders, don't know what to do with stuff like that.