Oil Inventories Fall Even as Imports Rise
U.S. crude oil inventories fell unexpectedly for a second week, reaching their lowest level in 24 years, an industry group said Tuesday.
Supplies dropped 2.1 million barrels to 282.6 million barrels last week, the American Petroleum Institute said.
The data show that more oil was in fact landing on U.S. shores. But a 17% increase in imports, to 9.36 million barrels a day, wasn’t enough to satisfy near-record demand from U.S. refiners.
“This report makes it all the more obvious that crude oil imports have got to remain well over 9 million [barrels a day] just to keep stocks in balance, and closer to 10 million for them [to build up again],” said Tom Blakeslee, an oil and gas trader at Energy Merchant in Wilton, Conn.
But strong fuel demand in Europe is “attracting barrels that would otherwise come to the U.S.,” Blakeslee said.
The spread between U.S. and European oil prices has narrowed in recent weeks, making it less profitable to ship overseas cargoes to North America.
Most analysts had expected U.S. inventories to rebound last week after dropping 9 million barrels the week before. Analysts surveyed by Bloomberg had expected the API report to show an increase of between 2 million and 3 million barrels.
The latest decline brought inventories to their lowest level since August 1976, when monthly Department of Energy figures put inventories at 277 million barrels, according to API statisticians.
The API report, released late Tuesday, pushed near-term oil futures up 71 cents to $29.83 a barrel in electronic trading on the New York futures market. In regular trading, oil had gained 21 cents to $29.12 a barrel.
Saudi Arabia unilaterally increased production last month to bring world oil prices down, even though many other members of the Organization of Petroleum Exporting Countries argued that no production boost was necessary.
Yet U.S. refineries still can’t get enough oil: Refinery demand for crude oil exceeded 15.5 million barrels a day for six of the past eight weeks, a level reached previously only during the summer of 1998.
A major worry for the market is what is happening with inventories of distillate fuel, which includes heating oil. Distillate supplies also fell unexpectedly last week, dropping 1.18 million barrels to 111.35 million barrels.
The decline left distillate inventories 20% lower than a year earlier and heating oil supplies down 39%--with only a few months left before the start of the peak-demand winter heating season.
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Higher Oil Prices Ahead?
Crude oil prices fell in late July on expectations that higher production would boost U.S. inventories. But new data show inventories have continued to decline.
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Weekly closes and latest for near-term crude oil futures contract in New York
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Tuesday: $29.12
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Source: Bloomberg News
