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Dennis Mangan, logi Energy, Comments on Inventory

Crude Oil inventory surprisingly increased last week by 1,762,000 barrels to 337,676,000 barrels. Inventory is down 5,956,000 from 13 weeks ago and is now up 25,727,000 barrels from a year ago.

We are at the 87th Percentile in barrels in storage, and we are at the 96th Percentile based on the 23.91 days of usage in storage. Distillate inventory increased by 349,000 barrels, to 167,725,000, the 99th Percentile. We are up 6,108,000 barrels from 13 weeks ago and up 39,374,000 barrels from last year.

We currently have 47.34 days of usage in storage, the 98th Percentile. Gas inventory increased 2,560,000 barrels to 210,837,000 barrels, the 70th Percentile.

We are up 1,083,000 from 13 weeks ago and up 12,742,000 barrels from a year ago. Days of usage are at 23.84, the 72nd Percentile. The Crude Oil inventory will match last year’s level, in 11 weeks. Prices then were $46.47, $31 less than current prices.

In 15 weeks we will be comparing a Heating Oil price of 119.67 cpg compared to the current price 200.35 cpg, and inventory will be 26 mm barrels higher. In 7 weeks Gas inventory will be about equal to last year. Price was 84.40 cpg, a 108 cpg lower than now.

In a few short weeks inventories will be about the same as last year, if they do not change, and price if it does not change, will be extremely over priced. The market is at extreme risk for a sharp break on a comparative basis. If demand does not improve sharply and if production does not drop we have a problem headed towards us on price.

If we have inventories increase, and there is no demand increase, price will look more than very high, on a year over year basis. Distillate demand must increase and that is not happening. Production must drop sharply and that too is not happening. Ultimately, if these two things do not change we end up looking at a huge inventory, too much production and little demand.

A price collapseRefinery inputs fell again and we are now sitting at the 3rd Percentile this week, Distillate production is at the 71st Percentile with the HO Crack Spread at the 48th Percentile.

Gas production is at the 75th Percentile and the Gas Crack Spread is at the 8th Percentile. The Ho Crack Spread remains high considering production levels but the Gas Crack has dropped dramatically.

Production has not fallen much so the Crack Spreads have fallen. Over production, low demand eventually leads to price problems. Current demand levels warrant lower than the current production levels. The production levels we have seen dictate a demand increase of 10% ore more and that is not here.

HO and Gas production must be decrease. If, production compared to demand for products, remains at these levels price and processing margins will not hold these levels. We will see pressure on price and the potential for a price collapse is increasing.

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