We've Got Oil

By Brad Zigler

Oil executives dodged a bullet on Tuesday. Had the hearings called by Rep. Edward Markey's (D-Mass.) House Select Committee been held after today's Energy Department report on oil inventories, there would have been a lot more sputtering and muttering on the Hill. As it was, chief executives of Shell, ConocoPhillips, Chevron, BP America and ExxonMobil were left speechless at one point by the committee's query on ever-increasing pump prices for motor fuels.

Wednesday morning, the government reported oil inventories outside the Strategic Petroleum Reserve shot up 7.4 million barrels over the past week, way above the 2.1 million barrel increase forecast. The daily inbound flow of crude to refineries stepped up 72,000 barrels last week to 14.2 million barrels. While not awash in oil, at 319.2 million barrels on hand, the U.S. is doing better than is typical this time of year. That should keep a lid on prices, barring some fresh supply insult.

Even though daily gasoline production inched higher, to 8.6 million barrels, inventories of refined motor fuels fell hard last week, decreasing by 4.5 million gallons. Insiders had bargained for a 2.2 million barrel drawdown. Still, stocks are above the seasonal average, so pressure on wholesale prices isn't likely to moderate soon. Gasoline stocks are up better than 10% from year-ago levels.

Supplies of distillate fuels, including heating oil, decreased by 1.6 million barrels, pretty much in line with estimates. Supplies are still relatively tight for this time of year.

May crude opened the NYMEX floor trading session 33 cents (0.3%) lower on Wednesday morning. The United States Oil Fund (AMEX: USO) ETF followed suit, off 26 cents (0.3%) to $80.80 at the opening. The iPath S&P GSCI Crude Oil TR ETN (NYSE Arca: OIL) opened 0.1% lower at $59.93.

Tomorrow: A look at refining margins.

Comments

[Ames Tiedeman:]

Oil is going back into the high 80's before it climbs to 125.

2008 Apr 03 07:20 AM

[Ron2008:]

I get a kick out of the analysts that are pointing to the increased gasoline demand for the week compared to a year ago as a reason to run up RBOB.

Maybe it was because driving for the Easter holiday was included in this week's report and it wasn't in the year ago report?

And maybe the gasoline inventories had a large drop because there is over 10% more in inventory than a year ago so there is no reason for refineries to keep making gasoline at their past rates?

2008 Apr 03 10:02 AM

[LJ:]

Remember, oil is not exclusively traded in dollar only. Even if dollar falls, oil priced in Philippines peso has not risen very much.

2008 Apr 03 01:50 PM

[pittsburgh_...:]

We all have to remember we are dealing with a SMALL number of companies controlling a VERY inelastic commodity. This is the 1970s all over again. Except THIS time people are seeing this is going to continue. They are changing habits, buying smaller cars, and buying less fuel. The enviromentalists wanted to tax fuel YEARS ago to encourage alternatives. We all said NOPE. But look at all the interest now! The majors are coming with plug in hybrids, batteries are getting better and better, and E85 is being made from tires. We have plenty of oil in shale, coal, tar sands, and the good old fashioned stuff to last for DECADES. And we can make 4 billion barrels of oil just by processing agriculural waste (Changing World Technologies and ConAgra).

The major Oil companies are cashing it out it seems. And nobody is noticing it.

2008 Apr 09 03:39 PM