Where did all the crude go?

Oil traders are scratching their heads.

American Petroleum Institute shocked the markets by reporting a 10.30 million crude oil inventory draw. Where did all the crude go? (NYMEX:CLM14) The drop came as refinery utilization increased to an impressive 90.3% of capacity allowing gasoline inventories to increase by 135,000 barrels and distillates by 1.36 million barrels.

We saw a big drop in imports crude as they fell 860,000 barrels a day explaining part of the drop. The word is that we will soon be re-exporting Canadian crude and that may be one reason why supply is being dislocated. Imported Canadian crude instead of backing up in Gulf Coast storage will be loaded on ships for far away destinations.

As time goes on U.S. inventories will be less ample because the need to store oil will be lower as the United States and Canada will continue to produce ample supply. So while the drawdown is bullish for price it is not devastating as supply is still well above normal everywhere but the U.S. delivery point Cushing, Okla.

Russia finally gave in to China on price to get done their long negotiated natural gas deal. Russia desperately need to save face as Europe will no doubt look to reduce its dependence on Russia that has proven that it less than a reliable supplier. Russian President Vladimir Putin's signed 30-year gas export deal with China that was in the making for 10 years. China proves once again that they are tough negotiators and used Russia's current exploits to no doubt get a better price with Gazprom in the reported $400 billion dollar deal. Of course at some point the Chinese may have to deal with the fickle nature of Vladimir Putin.

Dow Jones reports European Union on Wednesday urged Russia not to disrupt natural gas flows through Ukraine and to pursue efforts to resolve its pricing dispute with Ukraine's government. In a sign of growing concerns in Europe over the deadlock between Kiev and Moscow over natural gas prices, European Commission President Jos Manuel Barroso said in a letter to President Vladimir Putin that "gas flows must not be interrupted."

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.


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