Analysis of U.S. EIA data: Crude futures sell-off triggered by inventory builds
New York - December 9, 2009
New York Mercantile Exchange (NYMEX) January crude futures on December 9 fell $1.95 and settled at $70.67 per barrel (/b) in a product-led sell-off triggered by inventory builds in the U.S. reported by the federal Energy Information Administration (EIA).
NYMEX January RBOB settled 6.73 cents lower at $1.8573 per gallon (/gal) while January heating oil plunged 8.16 cents to settle at $1.9093/gal.
The February Gulf Coast sour crude contract settled down $2.42 at $71.53/b.
Total U.S. oil demand languished at 18.348 million barrels per day (b/d) for the week ended December 4, according to the EIA, having edged up just 25,000 b/d from the prior week. Soft demand translated into stock builds for both gasoline and middle distillates.
U.S. gasoline inventories rose 2.253 million barrels to 216.334 million barrels, which were 12.582 million barrels above the five-year average and up 13.67 million barrels on the year.
Stocks of middle distillates rose 1.619 million barrels to 167.317 million barrels, 38.55 million barrels above the five-year average and 36.73 million barrels above last year.
Only a long, deep cold blast along the Atlantic Coast could start to erode the inventory surplus in middle distillates, but even then, stocks of ultra low sulfur diesel remain exceptionally high, reflecting the weak state of the U.S. economy.
Distillate demand on a four-week moving average was 3.541 million b/d, down 8.3% on the year.
While gasoline and distillate stocks increased, inventories of residual fuel oil, propane and propylene, other oils and unfinished oils declined, causing total product stocks to essentially be unchanged at 750.193 million barrels. Total U.S. product stocks were 53.596 million barrels above the five-year average and up 53.059 million barrels on the year, a still large surplus.
Stocks at Cushing, Oklahoma – home of the NYMEX futures contract delivery point – climbed 2.464 million barrels to 33.353 million barrels, just 1.563 million barrels below the all-time high of 34.916 million barrels in the week ended February 6, as the widening contango provided the incentive to store barrels.
The NYMEX January/February crude futures price spread settled at minus $1.88/b December 9, narrowing from minus $2/b the prior day.
While Cushing stocks increased for the sixth consecutive week, overall U.S. crude inventories fell an unexpected 3.823 million barrels to 336.076 million barrels, as imports dropped to a 15-month low of 8.137 million b/d.
U.S. commercial crude stocks were 20.94 million barrels above the five-year average and 15.312 million barrels above last year, having eroded the surplus against the averages since the onset of the fourth quarter.
While crude imports dropped to an abnormally low level, refinery throughputs climbed 253,000 b/d to 14.33 million b/d, with the increase concentrated along the Gulf Coast and in the Midwest.
Crude imports onto the Gulf Coast fell 917,000 b/d to 4.16 million b/d, the lowest level since September 2008 when Hurricane Gustav prevented tankers from offloading in the Louisiana Offshore Oil Port and the Houston Ship Channel.
The combination of the decline in crude imports and increase in runs caused Gulf Coast crude stocks to drop 6.7 million barrels to 164.8 million barrels, the lowest level since the week ended January 2.
Low imports as refiners attempt to manage inventories in the face of still weak demand readings have been behind the slow erosion of crude stocks against the averages.
For more information on crude oil, visit the Platts website.
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