Diesel Draw – All Down Hill from Here?

On Wednesday, WTI crude closed up slightly following equities higher.  Bullish inventory news from the EIA and weakness in the dollar helped to lift crude above the $40 level. Crude is giving back those gains in early trading this morning.

WTI Crude climbed 2.4% on Wednesday after the EIA reported that domestic crude had a surprise decrease last week – to the lowest levels since April. Crude fell back from intraday highs as demand concerns due to the pandemic and fading optimism for a stimulus package kicked in. Lagging gasoline demand is expected with peak driving season in the US behind us. Is the draw in diesel the start of a trend?

This past week we saw diesel inventories draw by 3.2 MMbbls, but they are still about 21% above the five-year average.  Will this be a new trend for diesel or just an anomaly? Looking ahead, diesel demand is expected to continue to increase as harvest season comes into play.  A cold winter is forecast by the Farmer’s Almanac and will spur demand for heating oil and diesel. However, diesel production remains high because refiners are reducing jet fuel output and instead putting those extra molecules into the diesel stream.  Only time will tell if diesel demand will outweigh supply.

The EIA reported a surprise decrease for crude of 2.0 MMbbls, versus an expected increase of 1.6 MMbbls. At Cushing, the EIA reported that stocks increased by 1.8 MMbbls. US crude oil inventories are about 13% above the five-year average for this time of year. Distillates reported a draw and continue to trend roughly 21% above the five-year average. Gasoline inventories had a build and are about 1% above the five-year average.

Crude prices are down this morning.  WTI Crude is trading at $39.08, a loss of $1.14.

Fuel is down in early trading this morning.  Diesel is trading at $1.1276, a loss of 2.5 cents.  Gasoline is trading at $1.1588, a decrease of 2.3 cents.

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The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore, no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein are provided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contracts.

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