HardAssetsInvestor

Written by Sumit Roy  |

November 09, 2011

Crude Oil Report: US Inventories Plunge Below 5-Year Average For First Time Since 2008

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Strong demand takes its toll on U.S. inventories.

The Department of Energy reported this morning that in the week ending Nov. 4, U.S. crude oil inventories decreased by 1.4 million barrels, gasoline inventories decreased by 2.1 million barrels, distillate inventories decreased by 6 million barrels and total petroleum inventories decreased by 15.3 million barrels.

Crude oil prices rebounded after the latest inventory figures, with WTI able to bounce into positive territory near $97; Brent was off its lows, but still down for the day near $114.

We continue to watch Brent for signs of a technical breakout. The benchmark has been testing horizontal resistance between $115 and $116 in recent days.

The eurozone sovereign debt crisis is the only factor keeping a lid on prices, but the situation there is extremely concerning, as we wrote in a recent report. A major financial shock in Europe would be decidedly bearish for crude oil prices regardless of current fundamentals.

Turning to this week’s EIA inventory figures, total petroleum inventories in the U.S. plunged by 15.3 mmbbl, against the five-year average of a 3.6 mmbbl withdrawal. In turn, inventories fell below the five-year average for the first time since November 2008. The deficit now stands at 5 mmbbl, or 0.5 percent.