Review of June data and the July PCE Report

A story of glass half empty versus a glass half full...

For months on end, the data has contained revisions of prior months being downward, which gave that current report a glass half empty kind of vibe.

For the past two months... the previous months data has been revised upward, which emits a vibe of glass half full for the current month.

That's a positive, imho.

https://www.bea.gov/news/2023/personal-income-and-outlays-june-2023

Certainly a downward trend is in full view across the board, when mentioning inflation...

The Annual PCE, ex food and energy, is also slipping.

This is good news, as it indicates "sticky" prices are starting their downward slide. Just in time, as energy prices seem to be edging up and food prices may as well. Not everything is rosy, but optimism is not unreasonable. 

EXCEPT, next month's projections are for PCE to come in around 3.4% and core at 4.4%. Is that the last dying gasp of inflation, or signs of things to come?

Quick Review of The Advance GDP report 2Q-2023

First off... a screen shot with some additions.

The report has some positives and some concerns. I would agree with the media reports of Gross private domestic investment carrying the load for the quarter, but is it sustainable... given recent slides and spikes.

I am a bit concerned about the Personsal Consumption Expenditures category, as it gives the appearance of losing steam. As the 70.7% indicates... it is a large part of the economy. It did gain, but lagged the overall. Additionally, the was quite a drop from 1Q performance, which itself was stellar... compared to previous recent quarters.

The trade deficit is weighing as heavily as some recent reports and is back into 2021 range. The big question is whether this will continue.

Lastly... government spending. I am a bit old fashioned, as I consider government spending as something that should match, but never exceed the overall economy... unless some dire circumstances are present. Not seeing that at present.

Gasoline consumption per latest EIA data, July 26, 2023

Gasoline prices (per AAA) rose from last report's $3.569, to $3.687. One year ago the price had fallen to $4.327, and was on its downward trajectory... into the mid September lull, around  $3.67. The current price is in line with last November's pump price.

Consumption slipped -2.2% week over week, and is +1.2% above year ago numbers. (This is a four week moving average). 

The import/export surplus of gasoline since last March 1st 2022, jumped to +105.3M barrels. That is an 1.7Mb increase over the week.

My past week prediction of a 5¢ rise in pump prices, turns out to have been optimistic, after an 11.8¢ rise. 

The current read of the cards, has a continued upward bias, with a near 6¢ increase. Hopefully, that is the extent.

I can think of many possible reasons for the rise, but they would just be speculation on my part. 

Crude and Petroleum Product Inventories - July 26 2023

Data per the EIA weekly report. 

Crude stocks fell by -600K barrels, from last week, yet remains only -0.3% 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 +4.2% above normal.

Distillates inventory slid 245K barrels; and Gasoline inventories slid at about 800K barrels. Distillates (-13.5%,-3.2%) and Gasoline (-5.8%, -3.1%) are both below 5 year and 3 year adjusted average inventories.

The SPR halted the decline last week and remains unchanged from this report.

WTI is $78.94, compared to $75.38 (+4.8%), one week ago, and $94.65, one year ago(-16.6%).

Refinery output improved on a weekly basis, yet remains below year ago levels

For anyone interested, the U.S. has exported 771.2M barrels of crude and petroleum products, more than imported, since March 1, 2022. It jumped nearly 16.9M barrels this past week.

Overall, crude stocks remain quite healthy, compared to this time last year, with days supply at 27.8, to last year's 25.6 days.

It is 6 of one and a half dozen of the other, for the crude prices moving upward. Supposedly China's crude demand will increase, due to Government intervention, although the outcome is still in doubt. The Saudi's will reduce production starting next month, although there are reports of increased Russian exports. 

All of this was theorized in April and then prices fell. Will this be a repeat?

Natural Gas Inventory Report, July 21, 2023

The Energy Information Administration released their weekly report yesterday.

Nationally, the inventory number continue to stay above the 5 year seasonal average.

The Pacific Region continues to gain, with last week's numbers, at -7.9% vs. -9.3% of one year ago. The 5 year seasonal numbers continue to improve.

In California, the price at PG&E Citygate in Northern California rose 57 cents, up from $4.32/MMBtu last Wednesday to $4.89/MMBtu yesterday. The price at SoCal Citygate in Southern California increased $2.24 from $3.40/MMBtu last Wednesday to $5.64/MMBtu yesterday. Natural gas consumption in the electric power sector increased by 84% (1.3 Bcf/d) in California and by 10% (0.3 Bcf/d) in the desert Southwest this report week

 Select inventories of EU and UK... 

Total EU rose to 82.53%, from last week's 78.63%.

It should be noted that Gas in storage does not represent usage. An Example would be Germany has 212+ TWH in storage, but consumed approximately 847 TWH in 2022, which was a 17% decrease from 2021.

The following contains pricing information, that is based in Mmbtu and converted to US dollars for comparison purposes only. Forex is used for this comparison and should be noted that actual exchange rates on delivery may vary. 

Simply put... The EU and UK consumers do not use US Dollars, so be wary of these charts.

Snapshot of the past, the current and the future outlook for prices.

Just for comparison, the UK current pricing would suggest £1,522.06 per annum, while the 12 month high (FEB-24) would suggest £2,286.37. OFGEM has a cap around £2,047, which is line with the October futures.

Gasoline consumption per latest EIA data, July 19, 2023

Gasoline prices (per AAA) rose from last report to $3.569. One year ago the price had fallen to $4.495, and was on its downward trajectory... into the mid September lull, around  $3.67.

Consumption slipped week over week, but stands 3.8% above year ago numbers. (This is a four week moving average).

he import/export surplus of gasoline since last March 1st 2022, jumped to +103.6M barrels. It had basically remained flat for the past 3 months, until the previous week's +2.3M barrel jump, and this past week at +2.5M barrels.

The pump prices are most likely set to rise, but in the 5¢ range. This is mostly based on crack spread edging up, exports, and refinery operation rates. Take you pick.

After the ups and downs, the pattern seems to be stable in the $3.55~$3.65 range. 

Crude and Petroleum Product Inventories - July 19 2023

Data per the EIA weekly report. 

Crude stocks fell by -708K barrels, from last week, yet remains down -0.8% 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 +3.2% above normal.

Distillates inventory edged up 13K barrels; and Gasoline inventories slid at about 1M barrels. Distillates (-13.9%,-3.5%) and Gasoline (-6.1%, -3.6%) are both below 5 year and 3 year adjusted average inventories.

The SPR halted the decline and actually increased 1K barrels. 

WTI is $75.38, compared to $75.87, one week ago, and $96.88, one year ago.

Refinery output improved on a weekly basis, yet remains below year ago levels

For anyone interested, the U.S. has exported 754M barrels of crude and petroleum products, more than imported, since March 1, 2022. It jumped nearly 9.3M barrels this past week.

Overall, crude stocks remain quite healthy, compared to this time last year, with days supply at 27.9, to last year's 25.8 days.

I have read where the talk is about crude prices jumping up and it might happen. However, how much of it is wishful thinking by crude traders? It is more satisfying to buy low and sell high... in an ever rising market.