Hurricane Isaac Hits U.S. Crude Supply

Production shut-ins due to Hurricane Isaac get most of the blame for the lower petroleum inventory levels we saw last week. Not only was production shut down for several days, but major refineries were closed along the Gulf Coast. As production starts up again and refineries come back online, the typical decline in demand following the summer driving season will probably reverse the inventory declines we saw last week.

The US Energy Information Administration (EIA) released its weekly petroleum status report this morning. US commercial crude inventories fell by 7.4 million barrels last week, bringing the total US commercial crude inventory to 357.1 million barrels, near the upper limit of the five-year range for this time of the year.

The Dow-Jones estimate called for a weekly crude inventory decline of 5.2 million barrels and an decrease of 3.6 million barrels to the gasoline supply. Crude prices, which had been relatively steady, rose sharply on the ECB decision and again following today’s report from the EIA. WTI futures hit a high of $97.71/barrel before pulling back slightly.

Total gasoline inventories decreased by 2.3 million barrels last week and remain in the lower half of the five-year average range. Over the last four weeks, gasoline supplied has declined by 1% compared to the same period last year. Total motor gasoline supplied averaged 9.2 million barrels/day for the four weeks — a rise of 0.7% compared with the same period a year ago.

For the past week, crude imports averaged 8 million barrels/day, a drop of nearly 1.5 million barrels/day from the previous week. Refineries were running at 86.1% of capacity, with daily input of 14.6 million barrels/day, down just 772,000 barrels/day from the previous week. Dow-Jones had estimated refineries running at 88% of capacity for the week.

Distillate inventories, which include diesel fuel, rose by 1 million barrels last week and remain below the lower limit of the average range. Dow-Jones estimated an inventory decline of 2.2 million barrels. Distillate product supplied averaged 3.5 million barrels/day last week, down 9.3% when compared with the same period last year. Distillate production totaled 4.3 million barrels/day last week, down 400,000 barrels from the prior week.

The United States Oil ETF (NYSEMKT: USO) is up 1.4% at $36.06 in a 52-week range of $29.02-$42.30.

The United States Gasoline ETF (NYSEMKT: UGA) is up 2% at $60.80 after posting a new 52-week high of $61.02. The prior 52-week range was $44.65-$60.10.

Paul Ausick