Review of EIA Weekly Report for 7-13-2022

 

Is demand destruction taking place in the gasoline market? The weekly EIA report does seem to suggest it. A whopping jump in gasoline inventory from last week (+5.8MB), although not at last year's level. The consumption numbers would lead me to believe that someone may have stubbed their toe, when doing the math. Highly unlikely, so consumption dropped off considerably.

Crude inventories jumped 3.3MB and distillates up 2.7MB. Across those 3 we get 11.8MB of products. 

Oh wait, I forgot the imports/exports. We had been exporting roughly 1MB per day more than importing of all products. This week indicated we imported slightly more than exports. Since March, we have exported 124,597,000 barrels of Crude and Petroleum products, than we have imported. 

Gasoline, on the other hand... continues to exported more than imported. 17,500,000 barrels more since March.

It still puzzles me, as this report is for week ending July the 8th, which included the July 4th holiday. Apparently, most people stayed home at shot off fireworks. It seemed that way in my neighborhood and lasts for days on end. Seriously, July the 12th and still lighting them up. 

In any case, the gasoline pump prices are on the decline, although not falling as fast as they rose. Still can see gasoline falling to $4.10 regular for the national average. Probably won't get there this month, but in August... possibly. Of course, it could all change very quickly. 

I should mention the importance of the strong dollar. In an alternate universe, where the dollar was stable compared to last year, the price of WTI crude would be in the $115 range and not the current $96. Hooray for the strong dollar... until it begins to weaken, which it will. It's just when.

On to the Natural Gas futures...

I have no idea where Europe and the U.K. stands on their natural gas supplies, but the pricing indicates a lot of pain going forward. I can only think of the USA status and hope for the best.

It seems a long time ago, but once there was a saying... if the U.S. sneezes, the rest of the world catches cold. Times have changed and I suspect... if Europe sneezes, the rest of the world will catch a cold. Maybe not that extreme, but if Germany is E.U.'s engine and their exports have fallen dramatically, even with a weak Euro... then something is terribly amiss, in my humble opinion. 

Breakdown of CPI DATA and Real Earnings, June 2022

It is that time of month, to survey the damage from inflation. The BLS report was released this morning and it was a whopper. (historical releases)

Remember that 8.6%~8.9% forecast? Toast!!!

From the release...

The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.3 percent in June on a seasonally adjusted basis after rising 1.0 percent in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 9.1 percent before seasonal adjustment.

The result looks like this...

I didn't fare much better, with an increase at 8.0% y/y and 1.1% m/m.

The various inflation numbers, from the BLS and others ended up looking like this. The Eurostat is my estimate, based on several months of data collection and attempting to understand their method. Their last data published for the USA was in April. 

With nothing really good on the inflation front, the hourly real earnings were dismal, falling further below the pre-covid February 2020 number.

The weekly real earnings followed the same pattern...

I will attempt a July reading for the CPI-U, as I do expect the month to month to be nearer to "0", than this month's 1.3%. This is mostly due to gasoline prices continuing to fall. This mornings national average was $4.61, and is steadily falling to possibly $4.11 per gallon... based on current future's pricing. This would be pricing back in the good old days, of April's average. 

March was actually higher at $4.22; May at $4.44; June at $4.93. February was at $3.52, for those interested.  However, the end of July will most likely still be in the $4.30 range, with a July average of approximately $4.55. (Barring any disruptions in refinery operation, etc.)

Backing the gasoline's rise out of the index, the CPI-U would have been about 8.4%. So the fall off of gasoline pricing does have a significant impact for this month's projections. Also, the core came in a bit higher than anticipated. 

So, I will project 0.3%~0.5% month to month and a reading of 8.9%~9.1%. I fervently hope I am over shooting, this time. 

Once again, in the too early to project C.O.L.A. category, I am adjusting to 9.4%~9.6%. The past few months have been much hotter, year on year, but we are now entering the normal seasonal slowdown period in certain areas and the rate of inflation "should" start to ease. 

The should start to ease, might be clearer with tomorrow's PPI release. I would hope for softer numbers. Friday's release of the retail sales, might also provide a further hint to "demand destruction". Then there is the role being played by the strong dollar. Without that, WTI crude would be about $115 per dollar. This also is impacting imported goods as well. How much of that "trickles down" to the consumer... is to be seen.

Review of EIA Weekly Report for 7-07-2022

 The EIA.GOV released their weekly report.

Here are some interesting tidbits... Our exports of Crude and Petroleum Products since March, stands at 124,758,000  million barrels more than our imports, which up near 5 million barrels from last week's report. Gasoline exports during the same period now stands at 16,625,000 million barrels more than our imports and up about 400K from last week. 

There is some semblance of relief at the pump, as current conditions indicate the national average drifting lower another 50¢ to around $4.25. You would think they might be lower, with demand decreasing, but imports still rule the day. If and when Europe settles down, expect these high prices to continue. But hooray, we can cheer for $4.25 at the pump, like it is some sort of consumer victory.

As certain politicians are already cheering the SPR release as working. It kept the crude prices somewhat at bay, but really did nothing for gasoline prices in the USA. You simply cannot export gasoline like we have the past 4 months and expect anything different.

Now on to natural gas (data from yesterday's close)...

I cannot help but notice the problems with futures, concerning U.K. and Europe in general. I recognize that U.K and Europe are outside my area of concern, but we talk about recession in the USA and what we are doing or not doing (about it), when we might consider a recession in U.K. and Europe, despite what they are doing or not doing. 

I wouldn't count out a NG shortage this winter in Europe. It would serve you know who quite well, as it would divide NATO. You know who might get blamed for a cutoff, but the root blame would fall elsewhere and by elsewhere... you know where!

On the bright side, the gasoline prices in the U.S. should continue to fall, as no hurricanes or "other" storms appear on the horizon. Even U.S. natural gas has somewhat stabilized, due to Freeport shutdown. 

Amazingly, government regulators have stepped in to embark on strenuous safety oversight... which will likely delay Freeport's timetable for restart and full operation of LNG exports. Remember... it is all about safety and has nothing to do with replenishing U.S. natural gas storage for the coming winter. 

Time to rest up for next week, which has a bunch of reports about June. Not sure what to expect.

Allow Me To Butt In, With a Rebuttal of Sorts

Here is the premise...

Some politician said it is the patriotic duty of gasoline suppliers to reduce costs and some rich dude says the politician is misdirecting or unaware of how the market works. This happened to flow right into some of my social media accounts.

This prompted one poster to reply with this. I won't do a screen capture, as it might be some violation of something. You can open the link. Crude Oil (WTI) is up 40% and Gasoline is up 60%, both from 1 year ago. It does seem to support the theory, that gasoline prices are out of line.

The problem being WTI and Brent are Global Benchmarks and Gasoline is basically a U.S. market... benchmark. So why is this? (click to enlarge)

This seems to have started diverging last fall. Here is the Price history of WTI Crude and Gasoline Futures. Which seems to be the product of exporting more gasoline than importing. For that information, here is the export history and the import history. (Weekly, in thousand of barrels).

IF gasoline futures had stayed in line with WTI, the futures would be around $3.44 and we (U.S.) would be averaging around $4.29 at the pump... nationally, and we would still be griping. 😭

I made this easy(?) to read graph on the difference...

Yes, we have upped the exports of gasoline and thereby forced the gasoline futures to battle with global pricing structures... just to keep gasoline in the USA. 

I didn't check on every country, as various countries are subsidizing, but I do keep tabs on the U.K. Even when factoring in the U.K. using a bit higher octane rating, the U.S. gasoline is a bit cheaper... when backing out taxes. This is not intended to explain away U.S. prices, but rather the nature of global pricing structures.

As to the patriotic theme, that is clearly intended for an American audience that sees a familiar name and thinks of it as an AMERICAN brand. In fact, they are Multi-National (Global) Enterprises. So they likely are being patriotic... but to what nationality?

Our patriotic politicians could reinstate the crude oil export ban, that was overturned in late 2015, and it would bring down the WTI price, but does not help the gasoline side of the equation, as there were no limits on gasoline exports. 

Has releasing 1 million barrels a day from the SPR done anything? Why yes, it has kept the WTI from going through the roof and gasoline following a similar track. 

Speaking of the SPR, with the draw of 1 million barrels per day to end at end of October... the U.S. is already planning to replenish those barrels.

Not sure what that will do to crude or gasoline futures, but there will be somebody, somewhere, ready to complain and blame someone. That someone will always be of the opposite political persuasion. 

It is sad to watch... but somehow, very entertaining as well. 

As for the Crude oil and petroleum products, much the same trend, for those interested...

Time to Reflect on My Grocery Hoarding.

I haven't reviewed my overall results and status for bit, so here goes. But am I really a hoarder. I wasn't early on, but became one. 

Early on, I found myself scrambling, just to keep certain things in supply. Obviously toilet paper was an issue and I even ordered from God knows where. Many paper products were not to be found on the shelves and on line ordering became the go to source. 

Even on line was bereft of many of these items. Staples such as a variety of beans, as well as other pantry items were not to be found. Granted, I was picky about brand, etc. but still it was quite a challenge. Even distilled water disappeared from shelves and led me to distilling my own... with limited success. 

By fall of 2020, the shortages seemed to have eased up. I was using curbside for groceries from 2 different stores and was still coming up with "out of stock" on numerous items. For example the T.P. orders were for different quantities and was very hit and miss... until one week, all quantities from both stores were in the basket. I stopped ordering curbside on the same day, as the vehicle was absolutely full. About 18 months of T.P. and I could wipe that from the list for awhile.

The pantry items started rolling in as well. I built some shelves in the den and began piling up the goods. By end of 2020, I was well supplied.

Here it is, middle of 2022 and I am still hoarding, but have long since began reducing volumes in storage. I am about half of where I was in late 2020, with more to go.

In 2020, people were hoarding because of Covid, but it would appear that inflation is now in the driver's seat, with people starting to buy pantry items before the price goes up. 

Where do I stand? I will continue to back off the storage and really see no purpose to stockpiling. I understand the concern of food "shortages" being a possibility... but the cynic in me suggests this could be a bit of fearmongering for the USA, although not for certain regions of the world. Besides, I have been hoarding fat for years and it might not hurt to reduce that bit of buildup. 

I think the food "shortage" will most likely be food insecurity and that could be worrying, as prices of basic commodities rise out of range of many people. 

End of the Month... June 2022

Okay, it is the end of June. Time for a recap of data published this month for May by the really smart guys, with comments by a really dumb person (me).

First up is the various inflation gauges...

(Note that I have estimated the Eurostat for the USA, as the official data has not been published.)

Not much relief in the inflation outlook, although demand destruction is becoming evident in certain core areas. Even gasoline and diesel usage seems to be tapering off. Prices maybe not so much... but exports are still outweighing imports.

The personal income and outlays suggest a reason for this. (click to enlarge)

Is it a one month anomaly or the start of a trend? It's possible the old adage of not being able to get blood from a turnip... may be in play.

Now on to GDP. Which slid from -1.5% to 1.6%, and the headlines are about consumer spending decreasing from +3.1% in the 2nd reading and now at +1.8%. It's the consumers fault!! The consumers still remained positive in expenditures and overall GDP fell. Aren't we overlooking that 800lb. Gorilla?

I can remember when the consumers were 60% of the economy; then 65%; then 2/3's; and now 70%. That 70% gets stated as something normal, which it isn't...

That's since early in the 80's, so what might have changed? Let me back out some numbers and see what it might look like in "fun with numbers". (You can guess what I backed out)!

The line edges up in "fun with numbers", but not like the first graph. We can't speak of that, as it is politically sensitive. The bottom line... we did this to ourselves.

I can't really say whether the 2nd Qtr. GDP will be better or worse, but 2nd quarter is over with today, so it is only a matter of waiting for the 1st read at end of July. Frankly, I think it will be positive for 2nd quarter, but the ship is starting to tilt, in my opinion. 

I can distinctly remember discussion of whether or not we were in a recession in spring 2008. I am not sure when the decision was finally made of it starting in December of 2007. It seems it was given that date after the recession "ended" in June of 2009. 

So we won't officially know whether we are in a recession, until it is over, or when the fat lady sings.  

Review of EIA Weekly Report for 6-29-2022

 

The EIA.gov has released the latest weekly report. 

Here are some interesting tidbits... Our exports of Crude and Petroleum Products since March, is 120,789,000  million barrels more than our imports. Gasoline exports during the same period now stands at 16,135,000 million barrels more than our imports. And you wonder why.

There is some semblance of relief at the pump, as current conditions indicate the national average drifting lower another 18¢ to around $4.68. You would think they might be lower, with demand decreasing, but imports still rule the day. If and when Europe settles down, expect these high prices to continue.

As for Natural Gas...

The outlook seems positive for moderation in natural gas pricing in the United States, but the picture is somewhat distorted by Freeport problems. I would still expect the futures price to jump up from $6.95, as Freeport resolves problems toward the end of the year. 

As to why the UK has diverged from the Dutch TTF... I have no idea, nor am I that interested. 

That's it for now!