Crude Oil Inventories Fail to Meet Expectations--API Distillates Rise More Than Expected

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API Distillates Rise More Than Expected: Economic Insight

New York, Nov. 7 (Bloomberg) -- The following is a summary of -- and reaction to -- the American Petroleum Institute's weekly report on U.S. oil inventories and production for the week ended Nov. 3.

Market Reaction

Limited. U.S. inventories of distillate fuels, which include heating oil and diesel, rose a greater-than-expected 1.35 million barrels, or 1.2 percent, to 115.21 million barrels. Ten analysts surveyed by Bloomberg News had expected an increase of between 400,000 barrels and 800,000 barrels, on average.

The increase left distillate inventories 15 percent lower than a year ago, narrower than the previous week's deficit of 18.5 percent. For heating oil, the year-on-year deficit narrowed to 31.5 percent from 34.5 percent.

The API report also showed that crude oil inventories were little changed, when analysts had expected a gain.

Oil futures were little changed in electronic trading on the New York Mercantile Exchange after the report was released. Heating oil for December delivery was down 0.13 cent at 94.80 cents a gallon, and December crude oil was down 10 cents at $33.30 a barrel.

Behind The Numbers

Contributing to the narrowing of the year-on-year deficit in distillate fuel inventories was a 4.23 million-barrel decline in supplies during the same week last year.

U.S. crude oil inventories rose 35,000 barrels to 281.70 million barrels. Analysts had expected supplies to rise between 1.6 million and 2.2 million barrels.

Supplies are 9.6 percent lower than a year ago, wider than the previous week's gap of 8.7 percent, and close to a 24-year low of 279.0 million barrels recorded on Aug. 4.

Imports of crude oil rose slightly last week to 9.7 million barrels a day, the second-highest rate of the year. Refiners processed less oil, operating at 93.8 percent of capacity versus 94.3 percent the week before.

Traders are waiting for increased output from OPEC and oil released from U.S. government reserves to be reflected in substantial increases in U.S. inventories.

The U.S. is releasing 30 million barrels of crude oil from its Strategic Petroleum Reserve to U.S. traders and refiners to help avoid a winter heating oil shortage. About 8 million barrels of that oil was delivered between Oct. 15 and Nov. 5, according to the Department of Energy.

A regional breakdown of crude oil supplies showed the largest inventory gain along the Gulf Coast, where supplies rose 2.44 million barrels. Inventories fell 1.71 million barrels in the Midwest.

That imbalance may have been caused partly by an unexpected two-day halt in oil flows through the Capline pipeline. The pipeline normally carries about 1.1 million barrels of crude oil a day from Louisiana to Chicago-area refineries.

The report also showed a 1.05 million-barrel drop in gasoline stockpiles to 189.64 million barrels, a one-year low. Analysts expected a drop of between 500,000 and 900,000 barrels.

What Analysts Say

``You would expect that with utilization down and the release of the Strategic Petroleum Reserve barrels and a lot of talk about OPEC barrels, that we would have seen a bigger build in crude oil inventories,'' said Peter Beutel, president of Cameron Hanover Inc., an oil consulting firm in New Canaan, Connecticut.

``Clearly the OPEC barrels are not here yet. They're still being produced and in some cases maybe they're starting their journey toward us, but there's still some time before they get here.''

As for heating oil inventories, ``we're talking about November now, and we've only got a few weeks left before cold weather sets in,'' Beutel said. ``We're running out of time.''

``The drop in utilization would suggest that we won't have any bigger build (in distillates) next week than we had this week,'' he said. ``After next week, we will be in the second half of November, and that's just way too late.''

Market Trend

Crude oil prices have traded over $30 a barrel in New York since mid-August as increased output from the Organization of Petroleum Exporting Countries and the promise of extra oil from U.S. government reserves has failed to build up U.S. inventories, particularly of heating oil. Political tensions in the Middle East, home to one-third of the world's oil supplies, have also helped prop up prices. Prices are up 30 percent this year.

http://pub3.ezboard.com/fdownstreamventurespetroleummarkets.showMessage?topicID=1904.topic

-- Carl Jenkins (somewherepress@aol.com), November 08, 2000


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