Canadian crude pipeline flow to Cushing, decreased by 106,174 bpd to 133,345 barrels per day last week, while volumes to Patoka, Ill, on TransCanada’s Keystone Pipeline were 1,372 bpd above the previous week. The volumes moved to Patoka were 35.2% below the year-ago week, while volumes moved to Cushing were 17.8% less than the same week last year.
Canadian crude imports to the United States decreased for week ending July 15 by 28,000 bpd to 2.849mn bpd and are now 600,000 bpd below the record-high reached earlier this year, according to the U.S. Energy Information Agency.
Last week, Canadian heavy crude price differentials were weaker versus West Texas Intermediate. The Western Canadian Select crude price traded around September WTI CMA minus $14.65/bbl at the end of the week, a widening of the discount by $1.05/bbl compared to the previous week.
According to Genscape (for more information on Genscape data products visit their website) a modest increase last week in the pipeline net flow (inflow minus outflow) at Cushing, which could result inventories building in Cushing according to Genscape pipeline data only. The net flow increased by 319,907 bbls for the week ending Jul 22compared with a decrease of 1.1mn bbls the previous week.
With refinery runs expected to increase I am expecting a build in gasoline stocks. Gasoline stocks are expected to increase by 0.5 million barrels which would result in the gasoline year over year surplus coming in around 25.6 million barrels while the surplus versus the five year average for the same week will come in around 25.7 million barrels.
Distillate inventories are projected to increase by 0.5 million barrels as exports of distillate fuel out of the U.S. Gulf were steady last week. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 9.2 million barrels above last year while the surplus versus the five-year average will come in around 18.7 million barrels.
The following table compares my projections for this week's report with the change in inventories for the same period last year. As you can see from the table last year's inventories are not in directional sync with the projections. If the actual data is in line with the projections there will be modest changes in the year-over-year inventory comparisons for everything in the complex.
Natural gas highlights
Natural gas prices were on the defensive for the third trading session in a row and one day ahead of tomorrow’s expiration of the August Nymex natural gas contract. The heat wave that has engulfed most of the United States for the last month or so is projected to finally begin to ease a bit in the 8- to 14-day forecast time-frame.
If the heat wave does in fact break and injections begin to increase more in line with the historical weekly builds the large overhang of natural gas in inventory that has been limiting any significant rally in natural gas prices this summer could possibly then turn into a deeper bout of selling.
From a technical perspective the spot August contract ended Monday’s trading session above the lower range support but inched closer to it a day before its expiration. The soon to be spot Sep contract has mostly followed the trading pattern of the expiring Aug contract but with slightly different trading range boundaries .The Sep contract also has attempted to breach its lower support level last week with each attempt failing. If the $2.60/mmbtu support level (Sep contract) is breached with a settlement or two below this level the spot September contract may move down to the mid-$2’s before any upside recovery.