The march higher continues for energy prices as WTI and ULSD set fresh 3-year highs overnight and Brent is knocking on the door of $70/barrel. The pending decision from the White House on Iranian sanctions continues to loom large over the market, making it seem easy for prices to continue along on their bullish trend lines for a 7th straight month.
Although the EIA’s weekly inventory report was less dramatic than the API, it did mark an 8th straight week of large crude oil declines and refined product gains, while demand estimates to start the year were good enough to keep the bull trend intact.
US Crude output dropped sharply last week, presumably due to complications from the extreme winter weather as most forecasts (including the EIA’s STEO) suggest that US production will average more than 10 million barrels/day this year. A year ago Cushing OK inventories were close to capacity, but start 2018 below the 5-year average after 8 straight weeks of solid declines. This could become a major story for the year if the NYMEX delivery hub stays relatively tight, and causes the WTI/Brent spread to close along with it, which could negatively influence refinery margins.
After setting a record for annual production in 2017, Refinery runs dipped across all 5 PADDs last week. Total throughput rates are still several hundred thousand barrels/day above year-ago levels, and nearly 1 million barrels/day above the 5-year average for this time of year. Refinery runs are expected to dip sharply over the coming weeks as plants catch up on maintenance that many postponed last fall in the wake of the hurricanes.