Oil prices broke through resistance despite the fact that US crude oil inventories fell a whopping 7.4 million barrels plunging 22 million barrels in just the last seven weeks. It seems that despite the fact that stock markets around the globe were celebrating Mario Draghi’s sterilized bond buying program, oil succumbed to rumors and innuendo.
About an hour before the pit session closed, a story circulated that there was going to be a release of oil from the Strategic Petroleum Reserve this weekend and that started the big sell-off. While it seems plausible in this global political climate, there is no hard evidence that this is about to happen. Besides, oil traders were a bit more nervous about the chart formation and the fact that unlike almost every other market on the globe, oil failed to get crazy on Mario Draghi fever.
Gasoline though seems to be another story. The Energy Information Administration reported that gasoline supply fell by 2.33 million, hitting the lowest level since November 2008 in the aftermath of Hurricane Gustav and Ike. At the same time, demand surged 1.2% on-week to 9.18M barrels a day, going 2.5% higher than a year ago.
Gas may have more issues in coming weeks. We are seeing another storm in the Gulf. If the storm gains strength it could slow recovery efforts in the Gulf. The market is still getting news that some refiners are putting off restarts because of the storm and others are having a hard time believing Venezuela’s boasts on how fast they can bring the Venezuela’s Amuay oil refinery, the country’s largest, to full capacity in “days.” Bloomberg News reports that while power was restored yesterday to Phillips 66’s Alliance refinery in Belle Chasse, Louisiana and that the refinery is being restarted the company does not think it will be operating until mid-month. Valero Energy Corp. estimates the startup of a new hydrocracker at its St. Charles refinery in Louisiana will be delayed until the second quarter of 2013 from the first quarter. The startup was pushed back because of Hurricane Isaac and a shooting Aug. 16.
Natural gas had a historic number. Despite the fact that Hurricane Isaac allowed only a 28 billion cubic feet injection into storage we still ended the month of August at a record high over 3.4 trillion cubic feet. Not only that, gas storage is 13.1% above last year and 10.7% .above the five-year average!
As of yesterday 43 percent of oil production and 21 percent of natural gas output from the Gulf of Mexico remains shut because of Hurricane Isaac, according to the Bureau of Safety and Environmental Enforcement, personnel have been evacuated from 10 production platforms and 1 rig.