Crude oil price retreated after briefly touching 2009-high at 82. The benchmark contract ended the day at 81.77, up +0.3%. While abnormally cold weather in the Northern hemisphere may increase fuel demand, industry report which showed unexpected stock builds evidenced fundamentals remained weak. Crude oil trades narrowly below Tuesday's close as investors await EIA's report for confirmation.

According to the industry-sponsored American Petroleum Institute (API), crude inventory drew -2.27 mmb in the week ended January 1. However, both gasoline and distillate stockpiles rose. Gasoline stockpile surged +5.6 mmb while distillate stockpile gained +0.962 mmb.

In a survey by MasterCard Advisors SpendingPulse, gasoline consumption in the US fell -3.5% to 8.93M bpd, the lowest level since November 2008, as driving during Christmas and New Year's Day declined. The biggest slump was seen on the Gulf Coast and West Coast, where consumption dropped -5.8% and -5.2%, respectively. While investors had anticipated consumption to be boosted by weather, SpendingPulse said cold weather might have reduced holiday driving. Gasoline price, after rallying to a 15-month high at 2.1315, pared gains as the rise seems to have overextended given the dismal demand.

The US Energy Department will probably report -0.5 mmb drop in crude inventory. For oil products, gasoline stockpile is expected to have risen for the 3rd consecutive week while distillate stockpile continued to draw although by a significantly lower amount.

Gold pared gains after advancing to as high as 1129.6 and ended the day flat at 1118.7 Tuesday. In Asian session today, the benchmark contract rebounds to 1124 again as USD weakens. Investors took profits from the dollar's rally over the prior 2 weeks ahead of jobless claims data on Thursday and the employment report on Friday. Worries about increase in initial jobless claims trimmed speculations about an earlier Fed rate hike. The Fed funds futures showed a 51% chance that the Fed will raise the policy rate by +25 bps by June, compared with 60% last week.

Weekly change in inventory as of 01/01/10 ChangeMarket Expectation Previous
Crude oil  -0.50mmb-1.54 mmb
Gasoline  +0.50 mmb-0.37 mmb
Distillate  -1.85 mmb-2.06 mmb

Comparison between API and EIA reports:


  API (Jan 1)   EIA (Jan 1 )  
 ActualInventoryPrevious Forecast (using API's inventory level)Inventory
Crude oil-2.27 mmb330.1 mmb+1.70 mmb +3.99 mmb330 mmb
Gasoline+5.60 mmb220.0 mmb-1.40 mmb +4.04 mmb220 mmb
Distillate+0.96 mmb163.2 mmb-3.50 mmb +3.72 mmb163 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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