Markets

Crude Oil Inventory Watch: Surge in Imports Brings Inventories Near 10-Year Highs

Inventories

The Department of Energy reported that in the week ending July 23, 2010, US crude oil inventories increased by 7.3 million barrels, gasoline inventories were close to unchanged, distillate inventories increased by 0.9 million barrels, and total petroleum inventories increased 9.0 million barrels. The latest movements put all inventory components at or near record seasonal highs. Refinery utilization finally ticked lower, but gasoline production hit a new all-time high. More encouragingly, demand continues to rebound, with gasoline consumption at three-year highs.

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Total petroleum inventories increased much more than the 5-year average. The surplus now stands at 64.376 million, or 7.1% above the 5-year average, up from 6.6% in the prior week. Total petroleum inventories are now just shy of last year's levels, which are the highest levels since 1990.

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Crude oil inventories again increased counter-seasonally. Inventories typically decline at this time of year when refinery utilization stands near its seasonal peak. A surge in imports was the primary cause of the large crude build. The overall surplus to the 5-year average increased to 32.888 million barrels, or 10.0%, up from 7.6% a week ago.

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Product inventories rose, but at a rate much less than in prior weeks, as refinery utilization decreased and demand rose. Nevertheless, gasoline and distillate inventories remain at or near record seasonal highs.

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Demand

Demand increased 2.3% week-over-week, an encouraging sign. Gasoline demand hit its highst level since July of 2007, which is the all-time high. Over the last four-weeks, total petroleum demand has averaged 3.4% higher than the year ago period. Gasoline demand is up 2.1% YOY and distillate demand is up 9.3% YOY.

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Imports

Crude oil imports surged 1.2 million barrels per day week-over-week. It could be that some of the floating storage in the Gulf of Mexico came back onshore. Over the last four weeks, imports have averaged 10 million barrels per day, 0.456 million barrels per day higher than the year ago period.

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Refinery Activity

Refinery utilization decreased for the first time in four weeks, dipping to 90.6% from 91.5%. Gasoline production on the other hand, increased to a new record high, or 9.648 million barrels per day.

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Miscellaneous

US crude oil production increased 0.5% from last week. Year-to-date oil output is up 3.7% from the year ago period.

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Inventories at the NYMEX delivery point, Cushing, Oklahoma were nearly unchanged week-over-week. Cushing inventories are only 775,000 barrels below the record levels set in May, yet prompt month calendar spreads are -0.45 now versus upwards of -4.59 back then.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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