Portfolio | High crude oil stockpiles bring volatility and uncertainty
United States stockpiles of petrol remain unusually high with only four weeks remaining during the summer driving season
Crude oil prices lost just under 20 per cent of their value in the last month and the single biggest force acting on them has been stockpiles, particularly US petrol inventories, which have proven to be very resilient.
Fundamentally there is little doubt that the market is balancing. But the pace at which supply and demand move toward balance looks slow and uncertain and that makes the ride ahead a rocky one with volatility being the only constant.
One possible explanation for the resilience in stockpiles could be that other proxies for US gasoline consumption have painted a less sanguine picture
Although US petrol demand has been relatively strong -- implied petrol demand according to the Energy Information Administration averaged 9.752 million barrels per day over the first four weeks of July versus 9.506 million b/d at the same time last year -- this clearly has not been enough.
United State petrol stockpiles totaled 241.5 million barrels in the week that ended July 22, a 11.6 per cent surplus to the five-year average for the same time of year, and with only four weeks to go from the unofficial end of the driving season, the surplus stockpiles will likely continue.
One possible explanation for the resilience in stockpiles could be that other proxies for US petrol consumption have painted a less sanguine picture. For example, US government data shows the number of miles driven by US motorists has slowed recently on a year-on-year basis.
Another reason for solid petrol inventories has been imports, which paradoxically have been running high with Europe too sitting on ample stockpiles.
