Oil Analysts Down For The Count

By Brad Zigler

Ooops. Oil Patch analysts were whiffed this week and missed on all four of their consensus calls on oil supply and production. While all the forecasts missed their collective marks, a couple got mighty close to the bull's eye.

First of all, there was the crude oil inventory estimate. The guys with the green eyeshades thought stocks would rise by 1.2 million barrels over the previous week's level. Market action yesterday seemed to intimate a different view, though. December NYMEX crude rallied to close above $70 for the first time in two weeks on Tuesday. That might have been a little Election Day exuberance. Overnight, crude eased back on profit-taking ahead of the weekly supply report's release by the Energy Information Administration.

When the EIA numbers finally came out, both bulls and bears were, at first blush at least, disappointed. Inventories, it turns out, remained flat at 311.0 million barrels. December crude, which opened the NYMEX floor session at $70, off a half-buck from Tuesday's close, then started to churn down to the $68 level as the inventory numbers were digested.

NYMEX spot crude had been working on establishing a short-term low, though closes above the 20-day moving average near $72 are still needed to confirm traders' willingness to dig in their heels. For the week, the rolling nearby NYMEX contract - now December - has gained 2.5%, though year-to-date, prices have fallen 26.5%.

Oil stocks appear plentiful for this time of year and, in fact, may be seasonally heavy.

NYMEX Nearby Crude Oil

Analysts missed their target on refinery usage as well, though not by much. Capacity utilization was pegged by EIA at 85.3% last week, the same level reported the previous week. The consensus forecast was 85.6%. Refiners, it seems, stepped up gasoline production at the expense of heating oil and other distillate fuels last week, which was reflected in the narrowing of refining margins to less than 6%. The NYMEX nearby one-month crack spread has flattened to $4 a gallon - and less - this week. A week before, when the crack was worth more than $5 a gallon, NYMEX futures were priced to offer refiners profit margins of more than 8%.

NYMEX Refining Margins Vs. Spot Crude

Gasoline stocks, which were expected to fall by 600,000 barrels, instead rose by 1.1 million barrels, though supplies are still seasonally low. In part, that's due to a 2.3% year-over-year falloff in demand for motor fuel.

Distillate inventories, too, rose, but by only 100,000 barrels more than analysts' expectations. Stocks were forecast to rise by 1.1 million barrels, but slackening demand hit this sector especially hard, mostly due to diesel costs. Demand is down 4.8% compared with last season, according to EIA.

Comments

[2-cents:]

And what were your estmates? It's easy to critise others after the facts.

2008 Nov 05 04:37 PM

[bill d:]

And your estimates would be ? Probably about as far off as some of those morons that were touting the hell out of ESV & RIG a while back.

2008 Nov 06 11:55 AM

[ValueInvestor:]

Analysts of any sort have similar batting averages as weather men. Remember, that's why they're analysts and not portfolio managers.

2008 Nov 06 12:17 PM