HardAssetsInvestor

Written by Sumit Roy  |

November 23, 2011

Crude Oil Report: Inventory Deficit Grows, But Brent May Fall To $100 On Eurozone Crisis

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While oil’s fundamentals are extremely bullish, macroeconomic worries may push the commodity lower in the short-term.

 

The Department of Energy reported this morning that in the week ending Nov. 18, U.S. crude oil inventories decreased by 6.2 million barrels, gasoline inventories increased by 4.5 million barrels, distillate inventories decreased by 0.8 million barrels and total petroleum inventories decreased by 3.9 million barrels.

 

 

Crude oil prices were lower after the latest figures on the back of eurozone sovereign debt concerns, with WTI last trading under $96/bbl, while Brent traded near $107.

 

 

 

Though crude oil’s fundamentals clearly remain strong, Brent may move toward support near the $100/bbl in the coming weeks as the crisis in Europe escalates.

 

 

Turning to this week’s EIA inventory figures, total petroleum inventories in the U.S. fell by 3.9 mmbbl, against the 5-year average of a 0.2 withdrawal increase. In turn, the inventory deficit grew to 14.7 mmbbl, or 1.4 percent.

 

 

 

Crude oil inventories plunged by 6.2 mmbbl, against than the 5-year average of a 1.7 mmbbl build. In turn, crude oil inventories fell below the 5-year average for the first time since Sept. 2008. The deficit now stands at 3.4 mmbbl, or 1 percent.

Regionally, inventories outside the Midwest fell, while those inside the region were essentially unchanged.

 

 

 

 

Gasoline inventories surged by 4.5 mmbbl against the 5-year average of a 1.1 mmbbl build. The surplus in the category rose to 6.1 mmbbl, or 3 percent. Distillate inventories, which include diesel fuel and heating oil, fell by 0.8 mmbbl against the 5-year average of a 0.5 mmbbl withdrawal. In turn, the deficit in the category rose to 10.1 mmbbl, or 7.1 percent.

 

 

 

 

Demand

Total petroleum demand in the U.S. fell seasonally to 18.6 mmbbl/d. On a four-week rolling basis total demand was down by 0.3 percent from last year. On that same basis, gasoline demand was down 4 percent and distillate demand was up 5.7 percent.

 

 

 

 

 

Imports

Crude oil imports fell 0.2 mmbbl/d week-over-week to 8.3 mmbbl/d. On a four-week rolling basis, imports have been 0.2 mmbbl/d above the year ago level.

 

 

 

 

 

Refinery Activity

Refinery utilization ticked up to 85.5 percent from 84.8 percent. Utilization remains close to the 5-year average, but above the year-ago level. Gasoline production rose to 9.5 mmbbl/d. Distillate production rose to 4.8 mmbbl/d.

 

 

 

 

 

Miscellaneous

U.S. crude oil production was little changed near eight-year highs at 5.887 mmbbl/d. Output has rising swiftly thanks to surging production in unconventional oil plays. Year-to-date output is up 2.4 percent year-over-year.

 

 

Inventories at the NYMEX delivery point in Cushing, Okla., were essentially unchanged at 32 million barrels, or 55 percent of the EIA’s estimate of capacity. Overall Midwest inventories were also essentially unchanged at 91.5 million barrels, or 73 percent of estimated storage capacity.

Front-month WTI calendar spreads moved into slight contango at -$0.12.

Front-month Brent calendar spreads narrowed slightly from +0.38 to +0.33, but still remain in mild backwardation.

West Texas Intermediate’s discount to Brent rose week-over-week to -$11.47 from -$9.28. Last week the spread briefly hit the narrowest levels in eight months at -$7.90 on news that the Seaway pipeline will be reversed. WTI’s discount to Louisiana Light Sweet fell to -$11 from-$12 last week.