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Commentary on weekly EIA oil inventories16/01/2013

Published Wednesday, January 16th, 2013

The latest figures from the EIA was more bullish than the API at first sight and was also slightly more positive than expectations but the initial enthusiasm might not last. The reason to say this is threefold. Firstly, total commercial stocks are up by 3.4 million bbls. They are 5% higher than a year ago and 4.1% above the 5-year average. Secondly, US domestic crude oil production are at a new 20-year high at 7.04 mbpd. Thirdly, distillate and gasoline demand has fallen on the year on a 4-year average basis.

Crude oil inventories experienced a surprise draw, which is made even more bullish by the 1.5 million bbls build in PADD5. Imports were down by 0.3 mbpd so the 3.8 million bbls decrease in PADD3 should not come as a surprise. On the other hand Cushing stocks hit a new life-time high at 51.9 million bbls. The latter is bearish. Nationwide inventories are 8.8% above last year’s level and 6.9% higher than the 5-year average. Domestic crude oil production reached a new 20-year high at 7.04 mbpd; it is not bullish either.

The build in gasoline stocks was smaller than forecast and the API figure, eventhough such a build is quite a mystery as refinery utilization declined by 1.2%. The biggest increase occured in PADD3 where refiners cut back utilization by 3.6%. Stocks are at an all time high in the Gulf of Mexico. Inventories in this product are sitting comfortably above both the year-ago level and the 5-year average (+3.3% and +4.2%).

With a little bit of goodwill the build in distillate inventroies matched expectations. Similarly to gasoline, the biggest jump took place in the USGC despite falling runs.The explantion is that total product imports fell by 300,000 bpd with net exports above the 1 mbpd mark for the first time since October last year. Nationwide distillate stocks are 10.5% lower than this time last year and 11.8% below the 5-year average.

Although total product demand was up 1.7% at 18.37 mbpd on the 4-week average basis, thirst for distillate hit its lowest level since since August 2009 at 3.38 mbpd. Demand for gasoline declined 0.6% and stood at 8.36 mbpd on the same basis.

The latest set of figures migth have been more bullish than expected but with total commercial stocks at their highest level since September 2012 it is hard to get positive on oil prices purely based on these numbers.

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.