As is usually the case (especially with the API data) the market was surprised by the numbers in the latest API reported released late yesterday afternoon for the second week in a row. The API reported another large surprise in inventory except this time it was a 5.1 million barrel build in crude oil stocks as refinery utilization rates plunged by 2.1% to 86.9% of capacity. The API reported a large surprise draw in gasoline inventories of 3.1 million barrels a build in inventory of distillate fuel that was within the expectations.
The market was expecting a smaller draw in gasoline stocks and a small build in distillate fuel inventories this week as the impact of the logistics shut-ins associated with Hurricane Irene work their way through the oil infrastructure. On the week gasoline stocks decreased by about 3.1 million barrels while distillate fuel stocks were built by about 0.3 million barrels. The main bearish item in the report was the larger than expected build in crude oil inventories of 5.1 million barrels. They also reported a big build of about 2.8 million barrels of crude oil in PADD 2. Crude oil stocks in the mid-west are not as high as they once were and even with this week's increase they are around the level they were at back late last year. However, the API build was a set-back to those expecting a correction in the Brent/WTI spread in the very short term...especially if the EIA report shows the same level of builds in PADD 2. So far the market has reacted slightly negative to the API report...mostly for WTI... as the industry awaits the EIA report later this morning. The results of the API report are summarized in the following table. If today’s EIA report is in sync with the API report I would view it as biased to the bearish side.
With the financial and commodity markets still in state of confusion and uncertainty it is not clear if this week's oil inventory reports will continue to have an impact on price direction. The more widely watched EIA data will be released today at 10:30 AM. I also want to caution that this week's data (as well as next week's reports) are going to be somewhat impacted by the combination of some logistical shut downs of oil operations along the US East coast ahead of Irene along with a large amount of consumers topping off of their gasoline tanks ahead of the storm.