Crude oil inventories in the U.S. fell more than was anticipated during the report week, leaving current stocks 12 million barrels behind the same time last year. Producers are running very near maximum production capacity to capture WTI pricing above $100.00, and despite production increases, the weak supply will continue to support pricing at current levels, near-term.
Meanwhile, U.S. rail transit of domestic crude to refiners on both coasts has increased. This has served to limit reliance on imported crude oil, but with Brent and WTI priced so near parity, the discount WTI used to offer will come in the form of reduced transport fees.
Market bulls who expected crude to pop on Syrian tensions have been disappointed by the whole situation and are now showing signs of throwing in the towel, giving up on the potential of a war spike. Many had believed tension in Syria would create selloff opportunities if the fear premium excited crude pricing, but as diplomacy cools tempers, crude has done little to signal a move higher is near.
With U.S. production nearing the top of capacity while improving the crude transit system, U.S. demand for Brent should fade in the first half of 2014. That along with infrastructure improvements will keep the United States moving toward minimizing imports into the coming year.
Crude Oil --
October 2013 WTI crude oil opened today at $108.50 and trailed amid high volume, continuing to chop sideways in a wide range. Next support lies at $104.21 and then $102. WTI has been above $100 since July 5 when the contract opened at $99.98.
U.S. crude inventories fell 4.4 million barrels to 355.6 million barrels -- now 12 million barrels below year-ago.
November 13 Brent crude oil futures opened today at $110.90 Next support lies at $108 and $107.50. A move below those levels would suggest downside potential to $105 and psychological $100. However, as WTI crude producers increase production to capture profits, OPEC producers may curtail production to balance global supplies in an attempt to manufacture some Brent price strength. Particularly as the United States relies less and less on Brent imports.
Currently, the WTI/Brent crude spread stands at $2.40 with Brent on top -- $1.48 cents firmer than the same time last week.
According to EIA, the U.S. average retail price of regular gasoline decreased four cents to $3.55 per gallon as of September 16, 2013, 33 cents lower than last year at this time. Prices were down in all regions except the West Coast, where the price increased 10 cents to $3.90 per gallon, the largest one-week increase since May 13, 2013. The largest decrease came in the Midwest, where the price was $3.49 per gallon, nine cents lower than last week.
The national average diesel fuel price decreased a penny to $3.97 per gallon, 16 cents lower than last year at this time. Prices fell in all regions except the Rocky Mountains, where the average price increased one cent to $3.94 per gallon. The East Coast, Midwest, and Gulf Coast prices all decreased one cent, to $3.98 per gallon, $3.96 per gallon, and $3.89 per gallon, respectively. The West Coast price is lower by less than a penny to remain at $4.14 per gallon, according to EIA.
Farm Diesel was 3 1/4 cents higher this week according to Inputs Monitor data at a regional average of $3.461/gallon with seven of the twelve states in our index unchanged. The highest price was recorded in South Dakota at $3.62, up 17 cents over last week, while Wisconsin captured the regionwide low at $3.23 -- unchanged on the week.
According to EIA, total U.S. propane inventories decreased by 0.1 million barrels last week to end at 64.4 million barrels, about 9.6 million barrels (12.9%) lower than the same week last year. Midwest stocks experienced a build of 0.6 million barrels, while East Coast stocks grew by 0.1 million barrels. Gulf Coast stocks dropped 0.6 million barrels and Rocky Mountain/West Coast inventories fell 0.2 million barrels.
Propylene non-fuel-use inventories represented 4.7% of total propane inventories.
LP moved 3 tenths in the Inputs Monitor Index to $1.432. The lowest priced LP in our index is in South Dakota at $1.24 while the high mark is at $1.89 in Indiana.
The national distillate supply fell 1.1 million barrels to 131.1 -- 2.9 million barrels above year-ago.
Graphs and partial text provided by EIA.