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Weekly EIA Report on US Oil Stocks

Published Wednesday, July 11th, 2012

Despite crude oil inventories fell harder-than-expected this week’s report from the EIA is more on the negative side. This is not to say that the selling we saw after the immediate release of the stats will continue but if the market were only reacting to the report today then prices should close lower from the current levels. One of the reasons to say this is that total commercial stocks grew by 3 mln bbls and it seems that the weekly increase that was interrupted by last week’s draw has been re-instated. Nationwide stocks are 31 mln bbls or 2.8% higher than last year and 28 mln bbls ot 2.6% above the 5-year average.

The fall in crude oil inventories was bigger than the API figure and than the forecast. However bullish the crude headline figure looks it is not. Of this build 3.9 mln bbls occured in PADD5 whilst PADD2 and 3 saw a combined drop of 1.4 mln bbls only. Within PADD2 Cushing stocks retreated back from close to the historic high by dropping 860,000 bbls, whilst crude oil imports that that were down 150,000 bpd at 8.59 mbpd are responsible for the drop in crude oil stocks in the USGC. Total crude oil inventroies are 22.7 mln bbls or 6% higher than this time of last year and 32.6 mln bbls or 8.6% above the 5-year average despite the third consecutive weekly drop.

Both distillate and gasoline stocks increased, possibly due to refiners running 0.7% higher than the week before. (it is the highest rate since July 2007).  Especially the more than 3 mln bbls build in distillate inventories are bearish as the forecast was for a build  of 400,000 bbls and the API reported a draw of 717,000 bbls. PADD1 and PADD3 (refiners were operating at 94.2% of their capacity in PADD3) saw the lions’ share of this increase in stocks. Despite this increase distillate stocks are 24 mln bbls or 19.9% lower than this time of last year and 21 mln bbls or 17.4% below the 5-year average.

Every single PADD experienced a build in gasoline stocks. We are in the middle of the US driving and current stocks, 4 mln bbls or 1.9% below last year’s level and 5.3 mln bbls or 2.6% below the 5-year average, seem to be adequate.

A little support can come from the fact that total product demand was up 0.2% at 18.95 mbps from last year on the 4-week average basis. Distillate demand increased by 2.7% and is at 3.61 mbpd but gasoline demand dropped 3.9% to 8.86 mbpd.

Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.