Review of PCE, GDP, and other Nonsense, for end of April, 2023

I found some things of interest in the GDP and PCE reports, but first... the usual nonsense.

The sticky prices continue to be the story. 

The 4.6%, in today's report, takes us all the way back to October, 2021 and 4.3%. About the time a suggestion was made to end the use of transitory.

The following chart is a snapshot of this month's report, compared to last month and the revisions are highlighted in red. Nothing sinister, as this happens frequently as it is based on incomplete data, that becomes more complete as time passes. 

In short... this month's data could be revised up or down by next month.

In any case, the PCE came in at expectations. Services saved the day, but before you think of restaurants as services... it is, but on about 18%. Think housing and utilities, which were a bit hot, imho.

Unfortunately, the expectations are a bit higher for April's PCE report. PCE at 4.5 and core at 4.7

GDP came in a surprise 1.1% annualized. The forecast I was looking at, was around 2.0% annualized. The problem with the downside surprise, is the -1.8% forecast for 2nd and 3rd quarter, with -0.6% for the 4th quarter.

The shocker was in the change in private inventory sector, which was -1.6, compared to last month's +136.5. The reason for such a number is where the big story might be. But, I am too tired to contemplated that any further on a Friday night.

Have a nice weekend!

West Coast Natural Gas Inventories still way below normal, but showing signs of life.

The Energy Information Administration released their weekly report yesterday.

But...

Slight improvement, with West Coast still lagging year ago, and 5 year. Mountain appears out of the woods, with everyone else showing hefty inventories for time of year. 

For Europe, inventories are well above both last year (double) and near top of 5 year average.

I shall divurge for a moment. Crude oil prices are in the range of October, 2021... or pre invasion, sanctions, etc. Yet global consumption is rather steady. Part of this was reducing SPR by various countries, but I suspect that significant amounts of "sanctioned" crude is still hitting the market. Then there is OPEC+, theoretically reducing output. So... 

I suspect the countries doing the sanctioning are ignoring these stream adjustments, as it benefits these countries, while talking a hard line. Virtue signaling has come to the sanctions regime, and was likely there... from the start.

On to the natgas pricing...

First up the USA. Prices have remained rather stable at the Henry Hub for nearly 3 months, with the average about $2.15MMBtu. This is more "normal" for pre Ukraine invasion pricing. The replenishment cost of the inventory is down, so the consumers should continue to see some easing.

For Europe the current pricing is still double "normal". It seems to have settled into a narrow band in the past 6 weeks. With the inventories heavy with very high priced natgas, the outlook for consumer relief is much farther down the road. 

Can Europe and the U.K. weather another winter? 

Gasoline consumption through last Friday, APR-21-2023

Gasoline prices were (per AAA) were down -3.8¢ this week, to $3.646. A year ago, the price had ballooned to $4.131. I eventually projected a -5.0¢ decrease. It is going the right direction.

The  consumption edged up a healthy +0.6% from last week, and jumped 6.8% above year ago numbers. (This is a four week moving average). 

The import/export surplus of gasoline since last March 1st 2022, stands at +99M barrels. This is a global market, so the global economy, as well as refinery output, is key to where pump prices will be. I should note this figure represents a massive 2M barrel drop from last week. 

Where will pump prices be next week? Last week, I forecast a -5.0¢ decrease and got a -3.8¢ drop. I hope this continues, and evidence suggests it will.

How much... maybe another -5.6¢ at the pump.

EDIT 4-29-2023: It has fallen -3.4¢, as of this AM, but appears to be near bottom at $3.615. Darn it! However not seeing any rapid rises... at this point.

The good news, is the predictions for a national average $4 pump price by March, then April... is looking doubtful for May.

A lot depends on the gasoline import/export balance. We saw what a surge in exports over imports could result in last year with prices jumping big time. The import/export margin has narrowed considerably, with the result in easing of pump prices.

I really wish I had a crystal ball and could tell which way the liquid gold is flowing... but I don't. All I can do is watch the future's market for some sense of what is happening.

Crude and Petroleum Product Inventories - APR 26 2023

Today's EIA.gov report. 

Crude stocks dropped a whopping -5.0M barrels, from last week, and pulled it down -2.6% from the 5 year seasonal average. It should be noted the 5 year average includes the abnormal 2020 and 2021 number. Otherwise, the current inventory is nearly +2.7% above normal.

Distillates fell -577K Barrels; and Gasoline fell -2.4M barrels. The SPR fell another -1.0M barrels.

WTI has fallen to $74.32, compared to $79.31, one week ago, and $100.41, one year ago. OPEC + did announce substantial output cuts, but the when, where and who, remains to be seen. 

I am still suspicious, which is basically me not being able to make sense of the price drop. It's almost as if someone, somewhere is not actually cutting output, or at least not in the near term.

Refinery output edged up on a weekly basis, and very near year ago levels.

For anyone interested, the U.S. has exported 621.5M barrels of crude and petroleum products, more than imported, since March 1, 2022. 11.8M barrels this past week. It could be stated that this is a result of SPR releases. Since that date, the releases have been 213M barrels, so that is about 1/3 of the reason. 

Overall, crude stocks remain quite healthy, compared to this time last year, with days supply at 29.3, compared to last year's 26.4 days.

While crude inventories remain in decent shape, the refining part of the equation is still lagging, compared to one year ago. Yet pump prices are edging downward. 

More later.

The Answer is Eight

The amazing things that can occupy our minds and divide us. 

8÷2(4-2)=

For some strange reason, folks think PEMDAS means multiplication comes before division.

From Mathnasium...

As you read them... from left to right. NOT one left to right, and then the other. 

Just a little ditty, for future reference, as these things seem to occupy the minds of so many. 

8÷2(4-2)=

Step one. Convert the Parenthesis (4-2), which becomes (2), the result being 8÷2(2)=

Step two. Going left to right the first MD is a D, so solve that division. Result is 4(2)=

Step three. Going left to right the next MD, is an M, so the result is 4x2=8.

Why is this so difficult, and why does there need to be so much back and forth, over something so simple?

West Coast Natural Gas Inventories still way below normal, but showing a slight rise.

The Energy Information Administration released their weekly report yesterday.

As usual, the overall indicates above seasonal 5 year average. Some areas are in much better shape than others. 

In the West, prices generally declined this week, except for the price at PG&E Citygate in Northern California, which rose 38 cents from $5.79/MMBtu last Wednesday to $6.17/MMBtu yesterday. The price at SoCal Citygate in Southern California decreased 33 cents from $7.99/MMBtu last Wednesday to $7.66/MMBtu yesterday. In the Pacific Northwest, the price at Sumas on the Canada-Washington border fell $1.17 from $4.80/MMBtu last Wednesday to $3.63/MMBtu yesterday. Southern California Gas (SoCalGas) began planned maintenance on Line 5000 on Monday, April 17, which will curtail 630 million cubic feet per day of natural gas flows through April 28.

Still about triple the price of Henry Hub.

Elsewhere...

According to news reports, the UK storage is sufficient to last through the summer. Not sure what that even means, as future's prices seem to indicate a rise. In any case, the so called cap currently in place of £2,500 is likely to show little easing, in my humble opinion.

German inventories are holding steady at 64%. It should be noted the winter was mild, plus consumption was reduced... largely by industry, according to Der Spiegel. Can that extend through another year? If productivity was not impacted... were these industries wasteful? 

Gasoline consumption through last Friday, APR-14-2023

Gasoline prices were (per AAA) were up 6.3¢ this week, to $3.684. A year ago, the price had ballooned to $4.101. I projected a 12.4¢ increase, and didn't get it. Hooray! Not a bad thing.

The  consumption edged up a healthy +0.4% from last week, and jumped 7.1% above year ago numbers. (This is a four week moving average).  

If you are really into this type of thing... the import/export surplus of gasoline since last March 1st 2022, stands at +101M barrels. This is a global market, so the global economy, as well as refinery output, is key to where pump prices will be.

Where will pump prices be next week? Last week, I forecast a +12.4¢ increase and got a +6.3¢ rise. I hope the reality is still less than my expectations.

EDITED APR-21-2023, SEE BELOW. So, it looks like a +5¢ increase at the pump. Here's hoping I am wrong again and the increase is less than half that, or maybe even lower!!

As for the outlook of $4 per gallon at the pump nationally... maybe by Memorial Day weekend, or the week preceding.

In any case, the national average has to rise, given the Gasoline Reid Vapor Pressure change. The outlook for the national average through the summer, is nowhere near $5. 

EDIT: THE +5¢ PROJECTED, IS NOW FLAT TO -5¢ FOR THE NATIONAL AVERAGE.