Energy Prospectus

The U.S. Energy Information Administration said in its weekly report that crude oil inventories increased by 5.0 million barrels in the week ended March 17.

Market analysts' expected a crude-stock gain of 2.8 million barrels, while the American Petroleum Institute late Tuesday reported a supply-increase of 4.5 million barrels.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, increased by 1.4 million barrels last week, the EIA said.

Total U.S. crude oil inventories stood at 533.1 million barrels as of last week, which the EIA considered to be at the upper limit of the average range for this time of year.

The report also showed that gasoline inventories declined by 2.8 million barrels, compared to expectations for a drop 2.0 million barrels.

For distillate inventories including diesel, the EIA reported a drop of 1.9 million barrels.
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I expect crude oil inventories to grow through early April and then go on steady decline. IEA forecasts that refiners will increase their draws from crude oil inventory by 1.9 million barrels per day in the 2nd quarter (compared to the 1st quarter) as they complete annual maintenance projects and gear up production of transportation fuels. Demand for gasoline and diesel goes way up in the summer, beginning mid-May. - Dan

"First, it should be noted that it is not uncommon for U.S. crude stocks to rise during the early months of the year, as refinery maintenance ahead of the summer driving season causes throughput to temporarily fall. Second, depending on the port of destination, the shipping of crude alone can take weeks. Thus, crude exported from, say, Saudi Arabia late in the fourth quarter of last year – when production was high – would not appear in U.S. inventories until the first quarter of 2017. Finally, within the U.S. itself, petroleum production remains in the midst of a five-month comeback due to recovering prices. The extent to which this rebound will continue in the months ahead, despite what is likely to be a flatter price outlook, remains one of the big unknowns for oil prices. It is the risk of higher-than-expected future U.S. growth, and not the evolution of U.S. output thus far, that poses a far greater threat to the price recovery."

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