Energy's Surprise Party

By Brad Zigler

Okay, the numbers are in. And there are some big surprises among ‘em, too. The latest Energy Department report shows crude oil inventories jumped 3.8 million barrels last week, more than twice the increase insiders had expected.

Gasoline stocks, on the other hand, fell. That in itself wasn't a surprise to analysts, but the magnitude of the drawdown certainly was. Regular motor fuel inventories sank by 1.5 million barrels last week. The bean counter expected a drop of only 800,000 barrels.

And distillate fuel stocks, including diesel and heating oils, swelled by 1.1 million barrels despite expectations of a modest 150,000-barrel increase.

The surprise hat trick was followed by this slapshot: Refining utilization backed off 0.2% to 85.4%. The oil-soaked cognoscenti had banked on a 0.3% uptick in capacity utilization.

The calendar, in part, accounts for some of the surprises in this morning's grab bag. Gasoline stocks are still above average for this time of year, while distillate stocks are lower than seasonal means.

While there was no surprise to the ensuing sell-off in crude oil futures after the government's inventory report was released, trading in the distillates indicated that traders might have already discounted the numbers by the opening of floor trading.

NYMEX June '08 Crude Oil - Intraday

Crude had been lower in the overnight market on profit-taking. As NYMEX traders took in the news, the spot June contract was offered down nearly $1 a barrel to $114.70. Heating oil and gasoline futures, though, rose.

A firmer U.S. dollar has been weighing on the oil markets lately, giving rising to some technical weakness. Still, the markets haven't given any indication of switching out of uptrend mode.

And that that should come as a surprise to no one.

Comments

[JREwing]

What's really strange is, is how low inventories in Cushing, OK are.

[Ames Tiedeman]

I think we are seeing a short term trend change. Look at USO it has fallen from 96 to under 91. The correction in Oil is here...

[Ames Tiedeman]

CrossingtheT,

Who do you work for Boone Pickens who thinks 150?

We go to 88.

[JREwing]

You know, every spring I hear guys, who just can't believe, that the 1990s, when oil was cheaper than dirt, are over. This is a new era. Do have any idea how many cars they put on the road in China, India , Russia, Brazil, Thailand, Vietnam and...and.. Do you think, their cars run on love and air or freakin' rainbows?? And those economies are growin' the hell out of the industrialized countries. Do you even look at the Baltic dry Index. It's up today again, although commodities are down across the board. There is no commodity bubble, there is a Euro/Dollar bubble.

So what if it takes 10-15% of commodities. That doesn't change the supply and demand picture one bit.