Crude Inventories Fall Sharply, Prices Jump

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report this morning. U.S. commercial crude inventories fell by 3.7 million barrels last week, bringing the total U.S. commercial crude inventory to 369.9 million barrels, above the upper limit of the five-year range for this time of the year. Dow Jones had estimated a drawdown of just 500,000 barrels.

The American Petroleum Institute estimate called for a weekly crude inventory decline of 5.4 million barrels and an increase of 417,000 barrels to the gasoline supply. Platts forecast a decline of just 300,000 barrels to the crude inventories and a drop of 2 million barrels to the gasoline supply. Crude prices, which had been slipping today, are up sharply on the substantial inventory drop. The early slide in crude prices was likely due to today’s stronger dollar.

Total gasoline inventories decreased by 1.8 million barrels last week and remain in the lower half of the five-year average range. Dow Jones estimated a drop of just 1 million barrels. Over the past four weeks, gasoline supplied has declined by 4.2% compared to the same period last year. Total motor gasoline supplied averaged 8.7 million barrels a day for the four weeks.

For the past week, crude imports averaged 8.6 million barrels a day, an increase of 221,000 barrels a day from the previous week. Refineries were running at 92.6% of capacity, with daily input of 15.6 million barrels a day, up by 36,000 barrels a day from the previous week.

Distillate inventories, which include diesel fuel, fell by 700,000 barrels last week and are below the lower limit average. Dow Jones had estimated a 500,000 barrel increase. Distillate product supplied averaged 3.6 million barrels a day last week, down 2.8% when compared with the same period last year. Distillate production rose to 4.7 million barrels a day last week.

The fire earlier this week at a Chevron Corp. (NYSE: CVX) refinery in California is likely to have a bigger impact on pump prices than the EIA’s weekly report. The spot price for gasoline shot up by about $0.25 a gallon yesterday and prices could rise above $4 a gallon according to some analysts. The impact on other areas of the country is likely to be negligible.

WTI crude rose by nearly $1.00 per barrel after the EIA report was published, to $94.37.

Paul Ausick