The weekly oil inventories data were released this morning, and Sharon Epperson was live at the NYMEX as the numbers came out. Gasoline holdings were up 5.6 million barrels, and distillate stocks rose 2 million barrels. Both numbers came in bigger than expected. On "Morning Call," Antoine Halff of Fimat explained why.
Halff, vice president of energy research, said the rebound comes from a very low baseline and the increase puts the gasoline and distillate inventories “back within a kind of normal range.”
But there’s no normalcy in the recent oil sell-off. Halff says the pullback in the oil market has more to do with overreaction to the warm weather. In reality, he says, warmer temperatures are bearish for gas, but not so much so for oil. The warm weather (especially in the Northeast, which is the primary market that predicates the fluctuation in distillate prices) means people aren’t turning on their heaters. But, according to Halff, the baseline for heating oil demand has been shrinking as people move from oil to gas. In the meantime, distillate demand in other fields – such as transportation – has been booming.
Halff went on to say that the correction in the oil market – with crude oil currently down $20 off its high last summer – will reverse.
“From a fundamental point of view, the [oil] market is tightening. But from a geopolitical point of view, it’s loosening,” Halff said.
Also reported today, crude inventories were down 1.3 million barrels. Refining capacity remained unchanged.