In the minutes following the DOE status report Wednesday, it looked like we might see energy prices break out to the upside as robust demand figures helped spur optimism in the marketplace.  A couple hours later however, stocks took a sharp move lower and energy futures were dragged along for the ride once again.

The technical outlook remains murky with RBOB gasoline showing the most potential – as one might expect since we’re in the window for the annual spring gasoline rally – while Brent, WTI and ULSD all look like they’re stuck moving sideways for now.

If you were to sum up US petroleum fundamentals based on last week’s DOE report, you might just say that demand is good, but supply is better.

US Crude production was estimated by the DOE to hit a new record high last week at 10.37 million barrels/day and US Refiners continue to run at record setting rates which should only increase as we head into spring.  Exports continue to provide the safety valve for both oil producers and refiners, helping to keep inventories within their seasonal ranges as domestic demand – while healthy – just isn’t big enough to keep up with the record setting pace of production.

East Coast gasoline stocks declined again last week, and while the New England states (PADD 1a) are holding above their 5 year range, the lower Atlantic states (PADD 1C) have not seen inventories this low since the wake of Hurricane Harvey.

That imbalance may find an unwelcome correction this week after Colonial pipeline was forced to shut down its main line number 3 which runs from the Carolinas to New Jersey after an issue was discovered in Maryland Wednesday.  Details are scarce at this point, but the limited market reaction so far suggests this is not expected to be a major event like we saw with the line 1 shutdowns in 2016.

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