Technical & Fundamental Oil Reports Specialists

Follow us

Commentary on weekly EIA report on US oil stocks 05/12/2012

Published Wednesday, December 5th, 2012

The latest report from the EIA on US oil stocks did nothing to cheer up the bulls. In a way it is a classic report in that that increasing refinery utilization (+2% at 90.6, highest since August) was coupled with a draw in crude oil inventories and builds in product stocks. Total commercial inventories grew by nearly 6 million bbls, the first increase in 4 weeks. This, in itself, is rather negative for oil prices, but this is not all. The draw in crude oil inventories can be attributed to the drop in the USGC. This 3.1 million bbls decrease occurred despite crude oil imports rose by 0.1 million bbls. The probable cause is probably refiners ramping up utilization in the US Gulf of Mexico to 95.2%. Cushing stocks dropped by 0.2 million bbls. Despite the draw crude oil inventories are well above both the year-ago level and the 5-year average. Domestic production was a touch below last week’s 18-year high of 6.818 mbpd.

 

The big bearish factor in this week’s report is obviously the nearly 8 million bbls build in gasoline stocks, the biggest weekly increase since 2001. It takes inventories in this product only 1.3% below last year’s level but 0.6% ABOVE the 5-year average.  This bearish figure is somewhat moderated by the fact the gasoline stocks jumped 2 million bbls in the US West Coast; nevertheless it is still a bearish statistics. The 3 million bbls build in distillate inventories is bigger than the API figure and well above analysts’ forecast. The biggest increase took place in PADD1 where refiners are gradually coming back on stream after Hurricane Sandy and they increased their runs by 11.4% to 77.1% last week. Gross product imports grew by some 400,000 bpd last week, whilst net product exports decreased from 900,000 bpd two weeks ago to 500,000 bpd last week. Total product demand stood at 18.337 mbpd last week, slightly over last year’s level but 600,000 bpd below the 5-year average. Gasoline demand at 8.354 mbpd is 2.6% lower than this time last year and 5% below the 5-year average. Distillate demand was at 3.544 mbpd, 9.6% lower than a year ago and 4.7% lower than the 5-year average. Most ingredients are there for lower prices and the initial reaction of the market is understandably bearish.

 

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.