Energy Futures Are Seeing Another Day Of Modest Gains To Start Thursday’s Session

Energy futures are seeing another day of modest gains to start Tuesday’s session, with ULSD once again leading the way in what would be a 5th straight increase after reaching a 13-month low last week. Some less bearish figures from yesterday’s DOE report, and some bullish economic data from China are both getting credit for the buying to start March, although the moves are quite modest, and are not looking trend setting at this point.

The DOE still can’t figure out where more than 2 million barrels/day of crude oil inventories are coming from, but unlike the prior two weeks, that didn’t translate into a huge inventory build. A surge in oil exports to the highest levels on record were the main contributor to stocks holding steady even though the government’s accountants found another 15 million barrels of inventory. Exports of US oil spiked to 5.6 million barrels/day last week (that’s more than 1.6 billion gallons shipped overseas in a single week) smashing the previous record of 5.1 million barrels/day set last fall.  Keep in mind that 10 years ago, the US was still effectively exporting no oil at all.

Reports suggest Exxon has started up its new 250mb/day crude unit at the Beaumont TX refinery, which will mark the largest increase in US refining capacity in over a decade. That increased capacity is not yet showing up in the DOE’s weekly capacity figures and may not be updated until the unit is fully online later in the month.

Diesel demand did tick higher last week but remains at the bottom end of its 5-year seasonal range, and half a million barrels/day below last year. In other words, there are 20 million gallons less diesel being used in the US every day than there was this time last year. Earlier this week, the DOE’s monthly figures showed that diesel consumption in the US slumped to a decade low in December, and so far in the new year things are not looking much better.

Gasoline demand meanwhile jumped above its 5-year seasonal range, and is outpacing year-ago levels. That relative strength may be in part due to average retail prices holding 25 cents below year-ago levels, whereas retail diesel is still 25 cents higher year on year despite wholesale values being lower.

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