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Crude Whipsaws Following Mixed Inventory Data
Crude oil prices edged higher in early trade following the larger than expected draw in crude oil inventories. This came on the back of Tuesday report from the API which also showed a larger than expected crude draw. Prices in crude spiked to 39 per barrel, but started to come off as traders analyzed the large build in heating oil.
The weather has been warmer than normal in the northeast, which is the largest heating demand areas for heating oil in the United States. NOAA’s most recent weather forecast continues to expect temperatures to remain above normal for the next 8-14 days. This scenario will eventually erode heating oil crack margins, and prevent crude oil stock piles from unwinding.
Crude rallied to 38.93 from 38.10 following the EIA inventory data which showed a 3.6 million barrel fall in crude stocks. Analyst’s had been expecting a 1.0 million barrel decrease. Meanwhile, gasoline supplies, seen up 1.5 million barrels actually rose 800k barrels, while distillate stocks were up a whopping 5.0 million barrels, versus expectations for a 1.0 million barrel rise. Refinery usage fell to 93.1% from 94.5%.
Overall demand continues to remain stable year over year, but the warmer weather is eroding distillate fuel demand. Total products demand over the last four-week period averaged about 19.8 million barrels per day, down by 0.6% from the same period last year. Over the last four weeks, gasoline demand averaged about 9.2 million barrels per day, up by 0.7% from the same period last year. Distillate fuel demand averaged 3.7 million barrels per day over the last four weeks, down by 1.2% from the same period last year. One silver lining was that jet fuel demand is up 5.5% compared to the same four-week period last year.
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