After soaring for 6 weeks, crude oil inventory declined -1.90 mmb (consensus: -0.2 mmb) to 363.2 mmb in the week ended May 28. Cushing stock added modestly, by +0.27 mmb to 37.9 mmb Moreover, gasoline stockpile drew -2.65 mmb to 219.0 mmb. We expect further decline in coming weeks as driving season began last week. However, distillate stockpile rose +0.45 mmb to 153.0 mmb.

WTI crude oil price rallied more than $1 to $74.21 after the report. However, momentum was so weak that price plunged to below 74 again, probably due to increase in Cushing stock and disappointing US data. Gasoline and heating oil also spiked but prices quickly retreated.

Disappointing US data reversed equity's rally and this hurt oil prices. Initial jobless claims dropped -7K to 453K last week, compared with consensus of 450K. ISM services index in May stayed flat at 55.4 while the market had anticipated modest improvement to 55.8. Factory orders grew +1.2% m/m in April, eased from +1.3% in the prior month.

Weekly change in inventory as of 28/05/10
Actual
Change
Market Expectation
Previous

Crude oil
363.2 mmb
-1.90 mmb
-0.20 mmb
+2.46 mmb

Gasoline
219.0 mmb
-2.65 mmb
-0.50 mmb
-0.20 mmb

Distillate
153.0 mmb
+0.45 mmb
+0.10 mmb
-0.27 mmb

Comparison between API and EIA reports:

     

 
 
API (May 28)
 
 
EIA (May 28 )
 

 
Actual
Inventory
Previous
 
Forecast (using API's inventory level)
Inventory

Crude oil
-1.42 mmb
361.5 mmb
+0.62 mmb
 
-3.15 mmb
362 mmb

Gasoline
-0.96 mmb
219.2 mmb
-3.19 mmb
 
-2.63 mmb
219 mmb

Distillate
+0.85 mmb
152.8 mmb
+1.50 mmb
 
+0.46 mmb
153 mmb

     

API collects stockpile information on a voluntary basis from operators of refineries, 76% of the time, using data in the past 4 years.

Source: Bloomberg, API, EIA