Energy Prospectus

The U.S. Energy Information Administration said in its weekly report that gasoline inventories decreased by 2.8 million barrels in the week ended August 5, much more than the expected 1.0-million-barrel decline.

For distillate inventories including diesel, the EIA reported a surprise decline of 2.0 million barrels.

The report also showed that crude oil inventories rose by 1.1 million barrels last week. Market analysts expected a crude-stock decline of 1.0 million barrels, while the American Petroleum Institute late Tuesday reported a supply gain of 2.1 million barrels.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, rose by 1.163 million barrels last week, the EIA said.

Total U.S. crude oil inventories stood at 523.6 million barrels as of last week, which the EIA considered to be “historically high levels for this time of year”.

Based on the EIA numbers (SWAGs at best), over the last six weeks U.S. crude oil production has averaged 8,471,000 barrels per day and imports of crude oil have averaged 8,320,000 barrels per day. Production is on decline and imports are increasing.

Crude oil in storage has increased the last three weeks, which again is just EIA's SWAG. However, it is not due to increased production but to increasing imports. If all we're doing is taking oil from ships and putting it into tanks, that is not necessarily evidence of an oil "glut".

IMO the declining gasoline and diesel inventories is a bullish signal, however I do think traders over-react to these weekly reports.

The Labor Day weekend should take down gasoline inventories.