Energy prices were weak yesterday (Tuesday). Nymex Henry Hub gas futures tanked despite a paralyzing weather forecast. Meanwhile, weak U.S. consumer confidence numbers and a significantly stronger dollar ignited a selloff in the liquids.
Last night, the American Petroleum Institute (API) reported a big draw in crude oil, a smaller net build between gasoline and distillate stocks.
The American Petroleum Institute reported a large, countercyclical, drawdown in U.S. commercial crude oil stocks of 3.1 MMbbls or -0.9%. We typically see a build at this point of 1.75 MMbbls ±0.4 MMbbls.
As such, crude oil stocks as of last Friday, February 19, per the API dropped to 334.4 MMbbls or 11.7 MMbbls (-3.4%) below a year ago, but 29.0 MMbbls (+9.5%) above the 2004-2008 timestep.
Expectations for today’s DOE report, per a survey on Bloomberg, average out to a build of ?1.9 MMbbls, i.e. in the upper bound of the historical range. Commercial stocks of crude oil per U.S. government estimates stood at 334.5 MMbbls as of the week ended February 12; 16.1 MMbbls (-4.6%) below the corresponding report from a year ago, but 28.4 MMbbls (9.3%) above the five-year average (2004-2008).
On the major products side, the API reported a 0.83 MMbbl drawdown in total ?2 oil stocks. The typical draw at this point of the winter is 1.5 MMbbls ±0.4 MMbbls. The API report was inclusive of a 0.79 MMbbl draw in heating oil stocks (>5×10-4) in the East (PADD I). We typically see a draw of 0.35 MMbbls ±0.44 MMbbls.
However, in light of stout furnace demand in key markets in the East, not to mention last week’s suspect 1.1 MMbbl reported build, this report is not difficult to reconcile. Expectations for today’s DOE report, per a survey on Bloomberg, average out to a draw of ?1.4 MMbbls, i.e. in the middle of the historical range. Commercial stocks of distillate fuels per U.S. government estimates stood at 153.3 MMbbls as of the week ended February 12th; 12.5 MMbbls (+8.9%) above the corresponding report from a year ago and 31.3 MMbbls (+25.7% above the five-year average (2004-2008).
Finally, the API reported a 1.7 MMbbl build (+0.8%) in total gasoline inventories. We typically see a small draw in gasoline at this point, 0.25 MMbbls ±0.5 MMbbls. However, given the poor driving conditions over the last several weeks, analysts at The Schork Report concur that a larger than normal build does not seem unreasonable.
For today’s DOE report the Bloomberg survey averages out to a build of ?0.3 MMbbls, i.e. on the higher end of the historical range, but again, in light of the weather, a larger than normal build is realistic.
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Stephen Schork is the Editor of, "The Schork Report" and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.