Crude oil inventory Watch: Surplus grows slightly, demand remains weak

By Sumit Roy, Wed Oct 20 23:01:00 GMT 2010 Inventories

The Department of Energy reported that in the week ending October 15th, 2010, U.S. crude oil inventories increased by 0.7 million barrels, gasoline inventories increased by 1.1 million barrels, distillate inventories decreased by 2.1 million barrels, and total petroleum inventories decreased by 2.0 million barrels.

This latest report arrested a three week trend in which the total petroleum surplus had been declining. The surplus to the 5-year average now stands at 96.769 million, or 9.3%, up from 9.2% in the prior week. Four weeks ago the surplus peaked at 10.7%.

Crude oil inventories increased more than is typical. Crude oil inventories have been remarkably stable over the past few months, displaying very little in the way of the seasonal fluctuations that we would typically expect. The surplus to the 5-year average stands at 38.045 million barrels, or 11.8%, up from 11.6% in the prior week.

Product inventories diverged with gasoline inventories increasing counter-seasonally, while distillate inventories decreased more than normal. In the bigger picture, we have seen product inventories trending lower after rocketing to multi-decade or all-time highs. There remains an overcapacity in the refining sector, however, thus product inventories should remain ample. The gasoline surplus now stands at 9.6% above the 5-year average, while distillate inventories are 22.6% above the 5-year average.

Demand

Demand remains weak and below the levels of last year. Clearly the economic slowdown in the United States is taking its toll on petroleum demand, as over the last four weeks total petroleum demand has been down 0.5% from the year ago period. This is in contrast to much of this year when demand was up year-over-year. Over the same four-week period, gasoline demand is down 1.4%, and distillate demand is up by 9.3%.

Imports

Imports bounced from the depressed levels of last week. Crude oil imports increased by 0.5 million barrels last week. Over the last four weeks, imports have averaged 8.7 million barrels per day, 0.4 million barrels per day below the year ago period.

Refinery Activity

Refinery utilization increased to 82.5% from 81.9% in the prior week. Utilization is slightly above the levels of last year, but below the 5-year average. Gasoline production rose a notable 0.3 million barrels per day last week.

Miscellaneous

U.S. crude oil production was little changed week-over-week. Year-to-date oil output is up 3.8% from the year ago period.

Inventories at the NYMEX delivery point, Cushing, Oklahoma fell over 1 million barrels last week. Front month calendar spreads are little changed from last week at -0.72.

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Wed Oct 20 23:01:00 GMT 2010

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