Oil inventories continue plummetting

[aerius]

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Oil prices up after inventory report
By JACKIE FARWELL, AP Business Writer


NEW YORK - Oil prices rose Wednesday after a U.S. government report showed crude oil stockpiles fell for the eighth consecutive week but gasoline supplies swelled.

Fears of further violence in Nigeria, the world's eighth-largest oil producer, also supported prices.

Crude inventories fell by 6.8 million barrels, or 2.3 percent, to 282.8 million barrels during the week ended Jan. 4, the Energy Department's Energy Information Administration said in its weekly report.

The drop was more than eight times the 800,000 barrels analysts predicted, according to a survey by Dow Jones Newswires. However, gasoline inventories beat expectations, rising sharply by 5.3 million barrels, or 2.6 percent, to 213.1 million barrels. Analysts forecast stockpiles would climb by only 1.6 million barrels last week.

"This was really a mixed report, not a bullish report," said Tim Evans, an analyst at Citigroup Inc. in New York.

Contributing to the drop in crude oil stocks were efforts by Gulf Coast refineries to minimize their inventories, which are subject to year-end taxes, he said. Crude supplies also tend to rebound early in the year, he said.

"When we have weak gasoline demand, as we do now, and when we have swelling gasoline inventories, as we do now, it's hard to make the case that the overall petroleum market is critically tight," Evans said.

Light, sweet crude for February delivery added $1.36 to $97.69 a barrel on the New York Mercantile Exchange.

Gasoline prices climbed 0.66 cent to $2.4805 a gallon.

At the pump, gas prices dipped 0.1 cent overnight to a national average of about $3.10 a gallon Wednesday, but remain well above the year-ago average of $2.30 a gallon, according to AAA and the Oil Price Information Service. The Energy Information Administration on Tuesday said gas prices are expected to average more than $3 a gallon through 2009 and peak near $3.50 this spring.

In London, February Brent crude rose $1.04 to $96.58 a barrel on the ICE Futures exchange.

The weekly report also showed that inventories of distillate fuel, which includes diesel and heating oil, rose by 1.5 million barrels to 128.7 million barrels. Analysts had expected a drop of 300,000 barrels.

Heating oil futures rose by 3.06 cents to $2.6669 a gallon. Natural gas prices jumped 11.5 cents, selling at $8.082 per 1,000 cubic feet.

U.S. refineries ran at an average 91.3 percent of total capacity, an increase of 1.9 percentage points, beating the expected 0.1 percentage point gain, the report said.

Reports that Nigerian militants are planning attacks on the nation's oil facilities also sent prices higher. In a research note, Vienna's PVM Oil Associates noted that the country had "already lost some 15 percent of crude output capacity" due to violence. Still it forecast increased production of around 2.35 million barrels a day for this year, up from last month's 2.22-million barrel daily output.

Oil was also being supported by a surge in the price of gold, analysts said. Gold futures surged above $880 an ounce Tuesday to their highest level ever, not accounting for inflation.

A monthly EIA report Tuesday predicted oil supplies will be tight this year but ease in 2009. The EIA predicted oil prices will average $87 a barrel this year, up from a previous estimate of $85. The average price will then fall to $82 a barrel in 2009, it said.

A barrel of light, sweet crude surpassed $100 a barrel on the New York Mercantile Exchange for the first time last week.

There is no oil crisis. We're not running short of oil. The ~40 million barrel drop in crude inventories since last October is clearly a market correction.

[Admiral Valdemar]

If this keeps up, the US oil network will collapse as Simmons predicted. There's no telling when that could be, it could be at 270, 250 or 100 million barrels. One way or another, they need to buck up the output and imports, else the spot shortages encountered so far will spread.

[J]

Looking through the DOE charts, the lowest crude inventory levels in the past 10 years was in January of 2004 when it dropped to ~263 million barrels so in theory the US is still at least a day abov minimum operable levels. Looking at the refinery input charts for that period, around half a million to a million barrels less oil was going into the rifineries then as compared to now.

Oh, and just for reference, crude oil inventories are over 20 million barrels lower now than they were following the double whammy of hurricanes Katrina and Rita in 2005.

Crude prices still ended up falling today, which was a bit of a surprise. It appears investors were pulling all their money out of commodities today and dumping it into stocks.

[NeoGoomba]

One thing I don't understand is the Gasoline/Oil relationshp. If Crude is bottoming out, shouldnt Gasoline be doing the same thing?

[Zablorg]

Pff, these oil depeletion news articles are entirely unneccisary. All it takes is a pessimistic mind and you've accurately predicted the current status of oil.

[Admiral Valdemar]

One thing I don't understand is the Gasoline/Oil relationshp. If Crude is bottoming out, shouldnt Gasoline be doing the same thing?

Not necessarily, because the refiners are likely drawing on their own stock to produce finished product instead of buying more oil at such high prices. It could be that next month, they simply can't keep this going, and raise gasoline prices. Of course, others speculate that the current election year status means someone is telling them to keep prices down and "take one for the team", as it were. Utilization is up as are distillates and petroleum, but oil is down. That's what it looks like to me.