The EIA’s recently released Short Term Energy Outlook had some extraordinarily bad news for refiners as far as distillate inventories were concerned. The EIA predicted that in five out of the next ten months distillate inventories will exceed 170 million barrels. This would be unprecedented to say the least as US distillate inventories have exceeded 170 million barrels only four times in the past 33 YEARS. This happened most recently in August 2010 and before that in three consecutive months during the depths of the financial crisis in the fall of 2009. The EIA has end of the month distillate stocks reaching an annual monthly low of 159.8 million barrels for this April. If they are correct, it would mean the highest yearly distillate stock trough since 1981. The EIA also predicts that distillate stocks will end the year at 176.6 million barrels-the last time any end of month distillate stock level was that high was November of 1982. The outlook for 2017 is fairly bleak as well as the EIA predicts that five of the twelve months will end the month with distillate stocks over 170 million barrels. While the EIA can certainly be wrong on their numbers,the trend of persistent oversupply for distillates is difficult to refute. (See worst is yet to come for diesel blog). Unless there are some significant fundamental changes to the distillate complex in the near term,diesel will remain a major obstacle to the crude markets recovery. The 2016/2017 distillate supply chart can be found below:
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