DOE Mixed Inventory Driving Oil Prices (OIH, DIG, USO, OIL)

The Department of Energy’s weekly energy inventories data is giving another mixed picture similar to last week.  The difference is that this was more in-line with expectations that what we saw last week.  We are watching the Oil Services HOLDRs (NYSE: OIH), the Ultra Oil & Gas ProShares (NYSE: DIG), the United States Oil (NYSE: USO) ETF and the iPath S&P GSCI Crude Oil Total Return Index ETN (NYSE: OIL) reactions based upon the supply data.  At 10:44 AM EST we have NYMEX WTI Crude up $0.63 per barrel at $79.75 0.5% (up from the $76.43 after the last week’s inventory data).

The Department of Energy showed a build up in crude oil by 1.312 million barrels to 339.07 million barrels.  Gasoline inventories fell again, but by ‘only’ 2.214 million barrels to 206.945 million barrels.  The surprise a week ago was that massive draw of 5.23 million barrels down to 209.159 million barrels.  Estimates this week from Dow Jones for a gain of 1.3 million barrels of crude and for a drop of about 800,000 barrels of gasoline.   Traders were looking for a gain of 1 million or so in crude and a draw of 1 million barrels or so on gasoline.

Distillates fell by 784,000 barrels to 169.888 million barrels.  Last week’s awful refining capacity numbers improved marginally to 81.1% from 80.9% a week ago.  We were looking for, and maybe hoping for, anything north of 81%.

The Oil Services HOLDRs (NYSE: OIH) is up 0.9% at $130.01, the Ultra Oil & Gas ProShares (NYSE: DIG) is up 2.2% at $38.92, the United States Oil (NYSE: USO) ETF is up 1% at $40.79and the iPath S&P GSCI Crude Oil Total Return Index ETN (NYSE: OIL) is up 1% at $26.95.

To add in another aspect, the weakening US Dollar is only helping to contribute to the rise in oil.

JON C. OGG
OCTOBER 21, 2009