The brutally cold weather up and down the East Coast and throughout much of the South has not led to any appreciable drawdown in natural gas levels, at least for the time being. On the contrary, gas inventories have exceeded their five-year average for the first time since 2013, according to the Energy Information Administration. The market remains well supplied and therefore prices should not be expected to rise much anytime soon.
As for crude oil, weekly stocks are at 425 million barrels. That is up 8 million barrels from the prior week and 63 million barrels (17%) above the same time last year. Production is still very high despite the price crash, which is quite interesting. Domestic output is 9.2 million barrels per day and that is about 1.1 million (13.5%) above the same time last year. Again, that's even with the price crash. In other words, we have seen no appreciable pullback in domestic production. Let me restate that: We have seen no pullback at all.
On the other hand, crude oil imports are falling. That's bad news for foreign exporters like Saudi Arabia and the rest of the Organization of Petroleum Exporting Countries (OPEC), for example. The more you look at the situation, the more it seems like the Saudis have lost control of oil pricing power to U.S. producers. The Americans have now become the "swing producers" or, price setters at the margin, and show no signs of wanting to push prices back up.
Gasoline prices were up for the third straight week to an average $2.27 for regular unleaded in the U.S. That was about 8 cents higher than the prior week and a rise of about 23 cents overall in the past three weeks. Despite this, prices remain well over a dollar below where they were a year ago. Reformulated gas prices are about 30 cents per gallon above where they were three weeks ago, but are also more than one dollar below levels from a year ago.
Total gasoline stocks are about 10 million barrels above last year and exceed their five-year range. Moreover, as with crude oil, domestic production is strong. The four-week average of finished gasoline production is 9.04 million barrels per day, which is about 140 thousand barrels per day greater than the same time last year, so as with crude, the market is well supplied.
Domestic gasoline demand has moderated some. Consumption dropped to 8.8 million barrels per day from the peak of 9.6 million bpd back in the week ending Dec. 26. However, current demand is still about 800 thousand barrels per day above last year, suggesting that the economy remains strong.
All the numbers continue to suggest the same thing: that oil prices will continue to trend lower barring anything unforeseen. The Saudis have lost control of price setting and U.S. output does not appear to be affected by the price drop, at least for the time being. Demand remains strong enough to keep producers pumping, but not strong enough to draw down stocks appreciably. That's a sweet spot for consumers, who should continue to reap the benefits at the pump.
Even those last three weeks' gains should start to come off very soon. I am told that some of that price increase was due to refinery outages and the changeover from winter time gas to warmer weather gas, which normally forces refinery retooling and changes.