On the other hand, over the last two months the year-on-year surplus of diesel supplies in the Midwest (PADD II) has narrowed from around 25% to 15%. Out West, a 4% surplus has morphed into an 8% deficit.
In light of industry wide efforts to minimize refinery throughput, these recent developments are not to be ignored. As we can see in the Chart of the Day in today’s issue of The Schork Report, per the preliminary numbers from the EIA, distillate fuel supplies in October fell well beyond the error bar of the average movement for the ten-year range ended 2007. In November stocks fell, counter to the historical norm.
For example, over the last 30 Novembers, from 1978 to 2007, distillate supplies increased 24 times, i.e. 4-in-5 years. Last November, at the height of the economic meltdown, stocks surged well beyond the norm as demand dropped. Keep in mind, the overall supply picture for distillate fuels remains quite secure. Yet, regional markets identified above, (intermodal demand for diesel supply in the West and Midwest) are disjointed. Thus, the combination of this event along with the extant pullback in refinery throughput is spilling over into the crack markets.