Inventories edged down for gasoline, jet fuel and distillates, with crude rising, as the total of all products decreased nearly 8M barrels. The SPR decreased about 700KB. Originally, 172M barrels were slated to be pulled, AND within 5 months(?). 130.6 Million barrels have been pulled and the drawdown has slowed significantly, with l00K barrels a day for last report, which is up slightly from last week.
I have heard there is a plan to release an additional 40M barrels in the November-December timeframe, via an exchange program to be released at some unspecified ?date? in the future.
Gasoline consumption declined on both the y/y and d/d, based on the moving 4 week average.
Diesel continues to be the big story, with no relief in sight, imo. Much is made of the crack spread on diesel, but I question some of those numbers. Typically, everyone uses the 3:2:1 method to calculate the spreads and reasonably associate that number with the refinery profitability margin.
The problem being the base unit being either the WTI or Brent benchmark, which excludes the shipping costs, insurance, etc. What appears to be excessive refinery margins, turns into profitability of insurance and shipping companies. This is particularly true for crude coming out of the Persian Gulf and destined for Asia.
Any consideration of halting or slowing distillate exports would run into another set of problems. With most of the refined distillate for export sitting along the Gulf Coast... how to get it back into the U.S. heartland.
There are existing pipelines that could be used, but might require displacement of some gasoline product, which would drive gasoline pump prices higher. It could balance the disparity in gasoline and diesel prices, but at what cost to the average person't pocketbook?
Then there is the issue of distillate fuel in Europe, which is the prime destination for a lot of this distillate export. Europe is already in dire straits over the natural gas inventory, unless a very, every mild winter.
Food for thought!
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