Crude and Gasoline Inventories - Jan. 25 2023

This week's EIA report.

Crude stocks went up +500K barrels, from last week; Distillates down -500K Barrels; and Gasoline up 1.7M barrels. 

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Refinery operation slid from 85.3% to 83.8% and word on the street is a lot of refinery maintenance is scheduled between now and May. 

Speaking of gasoline prices, according to the AAA, pump prices are up 12.2¢ from last week and 38.5¢ above the December 23rd low.

Gasoline consumption, on the other hand, hit two year lows...

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A part of me says the run up in gasoline prices is due for a pause. Of course, another part of me says... I don't know what I am talking about. 

Consider these...

• Refineries are scheduling maintenance and are below year ago operational levels, after some dramatic drops the past 4 weeks.
• Consumption has fallen to levels not seen since January, 2021.
• Pump prices have been on the rise.
• The typical lull in consumption is during this period of the year, with a typical February showing volume increases, extending into the summer months.
• Today's AAA price is $3.481 and one year ago was $3.335.
• Today's WTI was $80.31 and one year ago was $85.96.

It's hard to see a scenario, where pump prices fall from current levels. But, how much of a rise? Will we see national averages in the $4 range? Or $5 range?

Crude, Distillate, and Gasoline Inventories - Jan. 19 2023

This week's EIA report.

Crude stocks went up +8.4M barrels, from last week; Distillates down -1.9M Barrels; and Gasoline up 3.5M barrels. The SPR slid a meager -1K barrels. 

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Consumption of gasoline continues its slide, with year over year down -4.9% and now down -1.3% from last year's lows. 

Refinery operation slipped to a 4 week average of 85.3%, from last week's 4 wk. average of 86.7%

National pump prices, according to AAA, have risen +10.7¢ from last week. Current futures pricing, indicates a bit of upward trend developing. even though domestic consumption is slipping and inventories rising. This against a backdrop of lower refinery operation. 

We are still exporting some hefty quantities of gasoline. 

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I have distillates in the title, although not much change overall, except in the East Coast numbers, which is more Central Atlantic.

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So far... so good!

Today's PPI Release... January 18th, 2022

 The BLS has released the December Producer Price Index Report. (historical releases)

The Producer Price Index for final demand declined 0.5 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.2 percent in November and 0.4 percent in October. (See table A.) On an unadjusted basis, the index for final demand increased 6.2 percent in 2022 after rising 10.0 percent in 2021. In December, the decrease in the final demand index can be attributed to a 1.6-percent decline in prices for final demand goods.

Wait there is more...

Nearly half of the December decrease in the index for final demand goods can be traced to a 13.4-percent decline in prices for gasoline.

There are four stages of intermediate demand, with 3 having inflation rates slowing in December. However, stage 2 rate of inflation surged.

Stage 2 intermediate demand: Prices for stage 2 intermediate demand advanced 2.2 percent in December following three consecutive declines. In December, the index for total goods inputs to stage 2 intermediate demand rose 3.5 percent, and prices for total services inputs increased 1.1 percent. Advances in the indexes for natural gas, deposit services (partial), fuels and lubricants retailing, business loans (partial), carbon steel scrap, and aluminum base scrap outweighed declines in prices for crude petroleum, basic organic chemicals, and guestroom rental. In 2022, the index for stage 2 intermediate demand rose 8.7 percent after jumping 21.6 percent in 2021. 

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This morning's release created quite a stir, for a few moments. Of course this report and the Retail Sales came out together. Coupled... suppressed a lot of hoopla. Inflation may be slowing, but so is consumer spending, which is a very large part of the economy.

Some Clarity on the December Retail Trade Report

 ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES, December 2022 

Advance estimates of U.S. retail and food services sales for December 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $677.1 billion, down 1.1 percent (±0.5 percent) from the previous month, but up 6.0 percent (±0.7 percent) above December 2021. Total sales for the 12 months of 2022 were up 9.2 percent (±0.4 percent) from 2021. Total sales for the October 2022 through December 2022 period were up 6.7 percent (±0.5 percent) from the same period a year ago. The October 2022 to November 2022 percent change was revised from down 0.6 percent (±0.5 percent) to down 1.0 percent (±0.2 percent).

The data is not inflation adjusted. The data in this graph is...

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The blue dots represents what we have spent in current dollars, and the orange represents the quantity of stuff we have bought. This clearly represents the when... for ramp up of inflation. 

It should be noted the December of 2022 decline is similar to the December of 2021 decline. 

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Putting it another way, this report indicates that total sales in current dollars, has fallen back to May, 2022 levels, while Quantity bought is back to August 2021 levels.

Or a third way, is to note...

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Retail sales have been fairly flat, the past year, when adjusted for inflation. It would also be reflected in the drop off in trade deficit, which indicates the supply chain is nearly healed. 

Some food for thought. Initially, inflation was blamed on supply chain issues rather than monetary/fiscal policy, AND would thereby be transitory. That theory would indicate prices falling back to pre-supply chain problems. 

Those prices have become sticky and show no signs of falling back to pre-supply chain levels. Thus monetary/fiscal policy should be the focus.

In fairness, I believe the FED has been forced to address the Fiscal failings, by using implementing monetary policy. Although, whether fiscal or monetary, it is the same sorry bunch, imho.

Don't be fooled by last month's data, as core PCE has become quite sticky in the 0.35%~0.4% monthly range, which is still twice what the FED wants.. Also, the PPI fell more than expected, but you would have thought the magic number has finally arrived. 6.2% year over year is not magical, imho.

Natural Gas Report, Jan. 13 2023

The Energy Information Administration released their weekly report Thursday. 

Natural Gas storage is still holding up in the USA.

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The data suggests we have "weathered" the recent cold spell.

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Looking across the pond, the German storage is currently holding at 90%. Germany has reduced Natural Gas consumption by a whopping -38% over the 2018~2021 average. As the storage across Europe has peaked and holding steady, the urgency for more Natural Gas has eased. It has also been a very warm winter. 

With that easement, the price of Natural Gas across major trading markets has also eased.

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While everything appears all rosy and nice, a lot depends on weather, and not just this winter, but preparation for next winter. 

CPI DATA and Real Earnings, January Reports 2023

The BLS report was released this morning and it was within target range. (historical releases)

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in December on a seasonally adjusted basis, after increasing 0.1 percent in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 6.5 percent before seasonal adjustment.

The index for gasoline was by far the largest contributor to the monthly all items decrease, more than offsetting increases in shelter indexes. The food index increased 0.3 percent over the month with the food at home index rising 0.2 percent. The energy index decreased 4.5 percent over the month as the gasoline index declined; other major energy component indexes increased over the month.

Much is made of the CPI decline over the past six months, but there is a recurring theme...

The index for gasoline was by far the largest contributor to the monthly all items decrease, more than offsetting... [insert item]

My CPI continues to improve...

Hourly earnings have just about caught up with pre covid earnings. Real Earnings

It is now a mere 1¢ below February 2020 level per hour. Weekly earnings are still -$1.30 to February 2020. Almost there.

Pump prices have leveled off. Other energy prices will level off very soon. Both will start to rise going forward into the summer months.

Core inflation has been mainly in check for the past three months due to adjustments in the medical area, as well as a continuing slide in used car prices. The Medical adjustments were a 4th quarter one and-done. The used car slide may continue.

Maybe I am a cup-half-empty guy, but I don't see inflation returning to acceptable levels before the fall. 

However, a recession might bring it down faster.  

Crude, Distillate, and Gasoline Inventories - Jan. 11 2023

This week's EIA report.

Crude stocks went up +19.0M barrels, from last week; Distillates down -1.1M Barrels; and Gasoline up 4.1M barrels. The SPR slid another -800K barrels. 

Consumption continues to drift lower on the four week average for gasoline.

Oddly, the refiner operating ratio slipped from 88.7% to 86.7%. There had been rumors of disruptions due to the winter storms, but those things are closely guarded secrets.

In any case, consumption has fallen for two consecutive weeks. It is -5.8% below this time last year. Again weather may have been a significant factor. 

National pump prices, according to AAA, have fallen -1.8¢ from last week. Futures popped higher today, but who knows what will happen tomorrow.

I would suggest pump prices are nearing the bottom. A lot depends on whether there is a recession and how deep it is.

Distillates edged up in the New England area...

Remarkably, the New England data improved from last week but is still below last year and... historical norms.

This improvement may or may not continue, as we are still three weeks away from Punxsutawney Phil telling us if spring is over or not.