Oil pops after inventory reversal

Ok, that's more like it

I have to admit I was a little stunned by the American Petroleum Institute weekly supply report which showed increases in both oil and gasoline supply. Yet after the Energy Information Administration report, it seemed that the energy world somehow made sense again. With all of the issues challenging energy production, imports and production, not to mention seasonal patterns, the weekly net changes make a lot more sense. Still there were some surprises.

While commercial crude oil inventories did fall by 3.7 million barrels, that happened as oil imports increased. The EIA reported that U.S. crude oil imports averaged 8.7 million barrels per day last week, up by 90 thousand per day from the previous week.

At the same time the EIA also reported that gasoline production increased last week, averaging just less than 9.4 million barrels per day despite the fact that we had the Enbridge pipeline out of commission and the BP refinery with major issues. Still it was reported that gasoline inventories fell by 2.4 million barrels.

Over all the report showed that total commercial petroleum inventories decreased by 4.6 million barrels, a very bullish number and even more bullish when you add to it a slew of provocative geo-political headlines and even more refinery problems.

Oil popped on a Reuters head line that said, "Saudi Arabia ordered its citizens to leave Lebanon immediately." "The Saudi Arabian embassy in Lebanon calls all Saudi citizens to leave Lebanon immediately," the alert said, without elaborating.” For the oil market already edgy of being on the edge, rallied on the report but Iran war rumor fatigue is beginning to set in.

Refining issues did not help the product market. Reuters confirmed local media reports that three contractors were hurt in a flash fire at its BP Whiting Indiana refinery late Tuesday and were in stable condition at a hospital on Wednesday. BP spokesman Scott Dean said the fire at the 337,000 barrels-per-day Whiting refinery, the largest in the U.S. Midwest, was quickly extinguished. Sources familiar with refinery operations said a coker unit was among several units undergoing planned work. The fire did not impact other operations at the plant, the sources said. BP declined comment on the work.

The EIA also reported that North Dakota's oil production averaged 660 thousand barrels per day (bbl/d) in June 2012, up 3% from the previous month and 71% over June 2011 volumes. Driving production gains is output from the Bakken formation in the Williston Basin, which averaged 594 thousand bbl/d in June 2012. The Bakken now accounts for 90% of North Dakota's total oil production!

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.


Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.

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