Oil prices rallied despite surprising increases in crude and gasoline inventories last week. Investors were instead thrilled by the huge draw in distillate stocks. The front-month contract for WTI crude oil price rose to a 2-week high 101.63 before settling at 101.32, up +1.74%. Price continued to climb further today. Fuel prices also jumped with heating oil touching 3.00 for the first time in 2 weeks after gaining +4.78% over the past 2 days. Gasoline strengthened in tandem despite weak demand ahead of the driving season and reopening of a refinery.
Total crude oil and petroleum products stocks jumped +6.76 mmb to 1054.22 mmb in the week ended May 20. Crude stockpile increased +0.62 mmb to 370.93 mmb during the week with both Gulf Coast and Rocky Mountain recording stock-builds. Cushing stocks climbed modestly. Utilization rate soared +3.1% to 86.3%.
Gasoline inventory rose +3.79 mmb to 209.73 mmb as demand declined -0.25% to 9.03M bpd. Imports jumped +67.87% to 1.45M bpd while production rose +1.40% to 9.26M bpd. Distillate inventory dropped for a 7th straight week, by -2.04 mmb to 141.09 mmb as demand surged +10.06% to 3.98M bpd. Imports declined -8.04% to 0.10M bpd while production rose +6.15% to 4.26M bpd.
Gold price remained firm amid worries on sovereign debt concerns in the European periphery. The benchmark Comex contract has been rising for 4 consecutive days with price reaching a 3-week high of 1532.5 before closing at 1526.7, up +0.22%. Whether Greece should seek debt restructuring continued to be under heated debates. The ECB said refusal of Greek debt as collateral 'may be warranted' and the country should step us budget cuts. Many officials are still reluctant to restructure Greek debts. ECB council member Christian Noyer said that 'restructuring is not a solution, it's a horror story', following Jose Manuel Gonzalez-Paramo's comments last month that such a move would 'very probably' generate consequences 'quite likely more devastating than' the collapse of Lehman Brothers in 2008. Gold price will be well-supported as long as the Greek situation remains uncertain because this will spur safe-haven demands.