The US Added Almost 9 Million Barrels Of Crude Oil Inventory Last Week
The US added almost 9 million barrels of crude oil inventory last week as we continue to pull from our Strategic Petroleum Reserve in an effort to lower prices. Slowing oil exports and a bump in imports is helping the nation replenish its energy stockpiles, however the total oil on-hand still remains below the 5-year seasonal average as the US, along with the rest of the world, continues to cope with the vast reduction of energy exports from Russia. We also added diesel and gasoline stores last week, according to the weekly DOE report released yesterday. Gasoline inventories added 333 thousand barrels last week while distillates increased by a meager 95,000 barrels.
Queen Elizabeth II ended her 70 year reign of the United Kingdom yesterday, passing away at the age of 96. While her death and shakeup of the monarchy isn’t expected to make any drastic impacts to the energy landscape, she died shortly after appointing a new prime minister whose first major action was passing a cap on electricity bills for the United Kingdom. This legislative action highlights the dire situation Europe is in concerning their projected energy costs for this winter.
While Hurricane Earl continues to churn out to sea, “only” threatening the US East Coast with dangerous rip currents, the rest of the Atlantic basin has calmed down significantly, for now. The handful of systems coming off the African coast are given a low probability (20%-30%) of organizing into a storm over the next five days. Tropical Storm Kay was downgraded from Hurricane status yesterday after making landfall in Baja Mexico. While the scope of her potential impact on the US mainland has significantly shrunk, the storm could still cause flash flooding in the Southern California area but will likely stay east of the major population centers of San Diego and Los Angeles.
Oil prices are set up for a drop on the week, however slightly, but price action is continuing to follow the bearish trend it started since mid-June. The gasoline chart is testing the support of its 100-week moving average in a bid to keep dropping in the short term. If the support doesn’t hold, not much stands in the way to keep the prompt month contract from challenging the $2 mark. Diesel, on the other hand, looks to be content in its sideways pattern, refusing to come back to “reality” since its overseas demand remains elevated. The proportion of global diesel demand vs gasoline is much higher than it is in the States and its use a backup fuel for heating and electricity generation has buoyed prices through this three-month selloff.