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Weekly EIA stats on US oil stocks 28/08/2012

Published Wednesday, August 29th, 2012

The latest report on US oil inventories from the EIA was broadly in line with the API stats and was more on the negative side. Total commercial stocks finally rose by 4.6 million bbls after four consecutive weekly builds and they are 9 million bbls or 0.8% higher than this time of last year and 14.2 million bbls or 1.3% above the 5-year average.

Analysts got it badly wrong as far as crude oil inventories are concerned as the EIA also saw stocks jumping although not as much as the API. The reason is the same: crude oil imports were up by 1.3 mbpd at 9.46 mbpd.  Not surprisingly, PADD3 saw nearly all of the increase. It will likely to be a whole different ball game next week due to Hurricane Isaac. Inventories at Cushing, Oklahoma fell 0.4 million bbls. Nationwide crude oil inventories are 7.5 million bbls or 2.1% above last year’s level and 18 mln bbls or 4.9% above the 5-year average.

The slight build in distillate stocks does not change the picture in this product; it is still the most bullish of all with current inventories 30 million bbls or 24% lower than this time of last year and 24.3 million bbls or 19.3% below the 5-year average. It is not surprising that the slight contango on the front-end turns into backwardation from December out and could easily widen in case of a cold winter in the Northern hemisphere. PADD 1 & 2 saw a combined increase of 2.7 million bbls.

The draw in gasoline inventories matches expectations but less than the API figure taking the bullish edge off of this product. By historic standards it is not as positive as distillates. Firstly, the US driving season will be officially over next week, secondly stocks are only 7.4 million bbls or 2.7% lower than a year ago and thirdly the 5-year average is only 6.5 million bbls or 3.2% higher than current stocks.

Demand figures did nothing to encourage bulls. Total product demand fell 2.1% to 19.21 mbps compared to a year ago on the 4-week average basis. Distillate demand was down 6.2% at 3.62 mbpd and gasoline demand stood 1% below last year’s level at 9.07 mbpd on the same basis. This week’s stats was more on the negative side but Isaac will cause a significant change next week. The question is how much of this change is built in the prices.

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.