Crude oil stockpile gained for the second week, by +1.67 mmb, to 349.5 mmb. At Cushing Oklahoma, supplies also rose +1.2 mmb to 33.3 mmb. We believe this was due to decline in refinery runs and increase in imports. Draw in gasoline stockpile was only -0.22 mmb, less than market expectation of -1 mmb. On the other hand, distillate storage drew -1.14 mmb, the first reduction after 7 straight weekly gains.

Probably due to higher-than-anticipated increase in crude inventory, selloff in WTI crude oil futures accelerated after the report. The September contract plunged to as low as 69.71 before recovery. Gasoline price slides to 2.017 from Tuesday's close at 2.057. Although distillate inventory declined surprisingly, heating oil futures pares early gains and is now trading at 1.91.

Also pressuring price was disappointing ISM non-manufacturing index and ADP employment report. US ISM non-manufacturing Index dropped to 46.4 in July, contrary to consensus of improvement to 48, form 47 in the prior month. ADP reported that the number of jobs declines -371K in July. While the pace of reduction has been slowed down from -463K in June, it was bigger than market forecast of -335K.

US Oil Inventory

Weekly change in inventory as of 31/07/09ActualMarket ExpectationPrevious
Crude oil+1.67 mmb+0.8 mmb+5.15 mmb
Gasoline-0.22 mmb-1.00mmb-2.32 mmb
Distillate-1.14 mmb+1.2 mmb+2.11 mmb

Comparison between API and EIA reports:

  API (Jul 31)  EIA (Jul 31) 
 ActualInventoryPrevious Forecast (using API's inventory level)Inventory
Crude oil-1.52 mmb350.9 mmb+4.07 mmb +3.16 mmb351 mmb
Gasoline+2.09 mmb215.7 mmb-0.047 mmb +2.92 mmb216 mmb
Distillate-1.04 mmb157.9 mmb+0.12 mmb -4.62 mmb158 mmb

API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department (EIA)for its weekly survey. Oil inventories from the API and EIA moved in the same direction for over 70% of the time, using data in the past 4 years.

Source: Bloomberg, API, EIA

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