Yesterday the U.S. Government reported that net commercial crude oil stocks fell by 4.8 MMbbls or 1½%. For a second straight week the bulk of the decline occurred along the Gulf and West (coasts. Conversely, we saw another huge build in the Midwest, inclusive of the NYMEX hub.
Furthermore, overall supplies in the Midwest rose to a record 89.7 MMbbls and at the NYMEX complex in Cushing, OK, supplies rose to within 0.6% of the record highs from last February. In other words, you can’t swing a cat without hitting a barrel of oil at the delivery point of the NYMEX contract, yet, said NYMEX contract rallied 3.1% upon receipt of this news.
Supplies of No.2 oil dropped by a heavy 3.03 MMbbls (-1.8%) to 161.3 MMbbls. The bulk of the draw accrued on the heating oil side of the ledger, particularly in East. We also saw a relatively large draw for diesel fuels on increased holiday intermodal traffic.
In addition to the seasonal uptick in gasoline demand (students returning home for the holidays and shoppers trudging off to the malls for last minute Xmas shopping), last weekend’s winter storms likely encouraged consumers to top off at the pump.
For example, in addition to filling up our SUV last Friday, we also filled up a two-gallon gas can for our snowblower. That is an extra two gallons of gas we will not purchase again until next December, i.e. last week’s increase in demand, 2.9% according to MasterCard, is transitory.
Looking at trading activity, Goldman Sachs might like buying crude oil -- but take a look at the graph in today’s issue of The Schork Report-- Sunoco et al do not… and, last time we were down there, we did not see a refinery at 85 Broad Street.
As such, demand to import and refine crude oil by the guys who import and refine crude oil will remain low into the first quarter. Bottom line, there are no refineries in lower Manhattan, but there used to be one in Delaware City.
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Stephen Schork is the Editor of, and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.