By Brad Zigler
U.S. crude oil futures edged higher overnight as concerns about Mideast oil supplies continued to worry traders.
Ahead of this morning's weekly Energy Department inventory report, the industry-supported American Petroleum Institute estimated there'd be a 970,000-barrel hike in domestic oil stores. Analysts, meantime, forecast crude stocks rising by 1.5 million to 2.0 million barrels.
When the actual inventory numbers were rolled out, crude stockpiles stood at 352. 8 million barrels, reflecting a 2.1-million-barrel build over the previous week. Domestic inventories haven't been that high since November 2010. Oil continues to pile up in the nation's Midwest region, in particular.
Energy Department data split the difference between the API guesses on gasoline inventories and Street forecasts. The API said gasoline stockpiles fell 7.9 million barrels, while analysts saw a decline of only 1.8 million to 2.0 million barrels. Actual supplies were drawn down by 5.3 million barrels.
In contrast to Street predictions of a 1.3-1.5 million barrel draw, distillate stocks were expected to fall by 612,000 barrels, according to the API. Government figures showed inventories remained unchanged.
Refinery utilization was hiked from 83.4 to 84.1 percent as output stepped up last week. Average daily gasoline production increased to 9.0 million barrels, while distillate fuel production averaged 4.3 million barrels. Average daily demand for gasoline is up 1.2 percent — to 9.1 million barrels — from this time last year. Distillate demand has jumped 3.6 percent to 3.9 million barrels.
Trading Week
Refining margins held steady this week as higher product prices checked the advances in input costs. West Texas Intermediate crude oil rose 7 percent for the week ending Tuesday. Gasoline prices climbed 7.4 percent, while heating oil increased 4.4 percent.
Gasoline-rich refinery runs grossed 23.9 percent this week compared with the 24.5 percent margin earned by distillate-heavy operations. Disparate gains in product prices narrowed heating oil/gasoline spreads by 7.56 cents a gallon.
The ethanol crush weakened by 5 cents a bushel as final fuel prices flattened. Gasoline's premium over ethanol rose to 52.2 cents a gallon.
Average daily volume for WTI futures fell 13.8 percent to 692,424 contracts. Nymex open interest dipped by 79,967 contracts to 1.514 million. Oil's expected volatility, measured by the CBOE Crude Oil Volatility Index (OVX), eased 1.1 points to 41 percent.
Brent crude's premium over WTI widened to $12.56 from $12.14 this week. Meantime, WTI's contango was trimmed. A three-month roll now costs $2.04 a barrel vs. $2.21 last week.
Technical Picture
After last week's volatility peak, momentum has flattened, as the nearby WTI contract struggles to maintain its 62 percent retracement of the 2008-09 dive.
On the upside, bulls are triangulating an attack on the September 2008 reaction high at $110.45 as a way station to another retracement marker at the $122.90 level. Decisive closes above $103.83 are needed to shake off the market's dead weight, though.
Today near-term support ought to be expected at the 10-day moving average of $101.57. Further down, the 50-day average at $93.60 backstops the trend.
Nearby WTI Crude Oil
