Gasoline Stocks' Surprising Drawdown

By Brad Zigler

Gasoline's been sucked out of storage according to the latest government figures. But, first things first ...

NYMEX crude oil churned 0.2% lower by the end of the Tuesday floor session following some early-morning volatility. The nearby November delivery seesawed above the $67.20 mark on short covering in overnight trading ahead of the release by the U.S. Energy Department of its weekly oil inventory report.

In a report of its own Tuesday afternoon, the American Petroleum Institute estimated the Energy Department figures would show U.S. crude inventories rising by almost 5 million barrels. Meanwhile, Street analysts were looking for a build between 600,000 and 2 million barrels.

Moderately bearish prognosticators were rewarded when the energy agency released figures this morning showing oil stocks actually increased 2.8 million barrels from the previous week.

This week's trend in crude prices foretold the build as the near-month delivery dropped 6.8% in NYMEX trading. Product prices also trended lower as gasoline gave up 7.7% and heating oil slipped 4.8% for the week.

Analysts were eyeing a 1-million-barrel build in gasoline inventories at the same time the API forecast a more bearish 1.7-million-barrel addition. All were taken aback by today's surprising drawdown of 1.6 million barrels. Even with the off-take, supplies remain above seasonal averages.

NYMEX Product Cracks

Refinery operations slowed down to a utilization rate of 84.6%, but plants still managed to increase gasoline output. Government data shows gasoline demand 5.4% higher than year-ago levels, while a report from MasterCard shows gasoline consumption spiking 0.9% higher than last week.

The Street's guesstimate for distillate fuel inventories proved fairly accurate when the Energy Department announced a 300,000-barrel buildup in supplies this morning. Production of distillate fuels, however, fell from the previous week's level. Distillate supplies, too, remain above average for this time of year.

The seasonal squeeze on crack spreads continued as gasoline margins deteriorated in favor of heavier distillates. And 3-2-1 refinery runs, at 6.4% Tuesday, now yield 1% less than 2-1-1 cracks. Over the past 12 months, the gross margin from 3-2-1 refining has averaged 17.8%.

NYMEX-Implied Refining Margins

Lighter, sweeter West Texas Intermediate's premium over Brent crude averaged $1.43 a barrel this week compared with last week's mean of $1.92.

Crude's three-month roll priced in heavier supply this week as the spread widened from $1.33 to $1.60 a barrel.

Nearby NYMEX Crude Oil

Bears hold the technical advantage in the crude oil market now. The nearby delivery will need to close above its 20-day moving average at $69.37 to signal the bulls' heels digging in. There's still overhanging pressure to be overcome at the 50-day and 100-day moving averages as well. Meanwhile, bears are scoping the July low of $61.38 as a downside target.

*Note: The monetary inflation rate is calculated daily and represents the change in our proprietary index over the last 12 months. We update long-term inflation in real time as well. Since 1999, the compound annual growth rate in our index is 4.9%.

Comments

[BullnBear:]

I'm long the refining sector via WNR and I may look to pick up another independent refiner or a large integrated name as well, the refining sector is where I want to be over the next several quarters.

Oct 03 12:32 AM

[Albertarocks:]

The title of this article belies the underlying scam that these reports really are. This has got to be one of the most successful and dirtiest games of all time perpetrated against investors, in that it's ongoing and accepted.

When was the last time figures that came out of the Energy Department (government) weren't "surprising"? If any of the officials at the Energy Department were working in the private sector, say for an engineering firm, and he was constantly caught by surprise... he'd be fired on the spot and wouldn't be given any golden parachute. In fact, he'd possibly be thrown out of the executive jet with no parachute.

Ok, there's 3 major groups who are involved in the releases of this data. There's the American Petroleum Institute who each month take a guess at what figures the Energy Department will be reporting. They might as well be reading a pile of fish entrails. Then there's a group referred to as Street Analysts who've got it all figured out... and are wrong every time. And finally, there's the Energy Department who are constantly "caught off guard" because nobody there actually knows what a calculator is for... nor does it matter to them. All that matters is that they get their puts purchased on time.

There is not one single reason in the world why anybody should be "surprised" by any data of such importance. If nobody is monitoring the inventory on a daily basis, then fire all the bastards and a couple of friends and myself will do it.

Oct 03 02:19 PM

[The Greates...:]

Does anyone really believe that we are almost 6% higher in use of gas today then a year ago? Less people driving today then 20 years ago, less people working since 2000, less equals less usage, we are not that dumb.

Oct 04 09:15 AM