Crude Oil Price Slumped on Huge Inventory Build

By IBTimes Staff Reporter | July 29 2010 2:19 AM

Total crude oil and petroleum products stocks jumped +9.00 mmb to 1118.9 mmb in the week ended July 23. That is the biggest increase since April 23 and the 7th consecutive weekly gain has pushed total crude and oil products inventories to the highest level since August 2009. Crude oil inventory surprisingly surged +7.31 mmb to 360.8 mmb. 3 out of the 5 regions recorded stock-build but the increase in the Gulf Coast soared +8.18 mmb. Draws in Rocky Mountain and West Coast failed to offset the builds. Cushing stocks rose for the third straight week but the increase this time was mild compared with previous weeks. Utilization rate slipped to 90.6% from 91.5% in the prior week.

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Concerning oil products, gasoline stockpile added +0.09 mmb to 222.2 mmb while the market had anticipated a dip of -1.75 mmb. Although demand climbed +2.09% to 9.63 mmb while imports plunged -7.915 to 1.08M bpd, production rose +3.57% to 9.648M bpd. Distillate stockpile increase less than anticipated as demand improved for the first time 3 weeks, by +7.18%, to 3.60M bpd. Production and imports also declined.

The front-month WTI crude oil contract broke 76 (low: 75.9) after release of the report as crude stock-build was huge. While price later recovered to 76.5, near-term risk is to the downside. Crude oil was also hammered by weaker-than-expected US durable goods orders contracted -1% m/m in June, compared with consensus of a +0.8% increase from -0.8% in May. Excluding transportation, the reading declined -0.6%, following a upwardly revised May reading to +1.2%.

Weekly change in inventory as of 23/07/10
Actual
Change
Market Expectation
Previous

Crude oil
360.8 mmb
+7.31 mmb
+0.30 mmb
+0.36 mmb

Gasoline
222.2 mmb
+0.09 mmb
-1.75 mmb
+1.12 mmb

Distillate
167.5 mmb
+0.94 mmb
+2.00 mmb
+3.94 mmb

Comparison between API and EIA reports:

API (Jul 23)

EIA (Jul 23 )

Actual
Inventory
Previous

Forecast (using API's inventory level)
Inventory

Crude oil
+3.08 mmb
356.3 mmb
-0.24 mmb

+2.88 mmb

356 mmb

Gasoline
+0.88 mmb
222.3 mmb
-0.41 mmb

+0.12 mmb
226 mmb

Distillate
+0.41 mmb
162.3 mmb
+0.98 mmb

-4.31 mmb
162 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

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