Does The Inventory To Sales Ratio Show Falling Gas Demand Is Stabilizing?

As gasoline prices inexplicably found a bid we examined the relationship between gasoline and distillate stocks to sales. Using the EIA data we have created an “inventory to sales” ratio for the product sector of the crude market.

The chart above graphs our inventory to sales ratio which is computed by dividing the stocks by demand. If stocks are increasing at a faster pace than demand then the ratio will climb.

For weeks you have read our comments on the oversupplied distillate market and now we have graphical proof. The blue line that is going parabolic is distillate stocks divided by demand. The chart shows that the supply of product is outpacing demand by almost a record margin.

As traders, when we see a chart going parabolic our first instinct is to short whatever the chart represents. Therefore, we must zoom in to see how the ratios are performing on a weekly basis.

This chart zooms in from April 2008 to present and illustrates that in the last few weeks demand has begun to gain some ground on stocks in the distillate components. The best that can be said about gasoline is the rise has stabilized.

We now have data that show modest improvement in demand relative to inventory, but we caution one point does not make a trend.

Disclosures: none

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