Analysis of US EIA data: Gasoline stocks climb to near 21-year high

New York - February 9, 2011

U.S. gasoline stocks climbed 4.663 million barrels to 240.891 million barrels for the week ending February 4, reaching the highest level since March 1990, according to data released Wednesday by the Energy Information (EIA). The climb was the result of an increase in output and a decrease in demand.

This analysis and commentary is provided by Linda Rafield, Platts senior oil analyst and editor of the weekly Platts Futures and Derivatives Review, a supplement to Platts Oilgram Price Report.

At 240.891 million barrels, U.S. gasoline inventories were 15.312 million barrels greater than the five-year average and 10.446 million barrels more than year-ago levels.

Over the past six weeks, gasoline stocks have cumulatively increased 26.034 million barrels.

Gasoline production increased 249,000 barrels per day (b/d) to 9.076 million b/d, largely in response to attractive margins.

However, gasoline demand continued to languish at low levels, a victim of a harsh winter and poor travel conditions across much of the United States and also relatively high levels of unemployment, which tend to curtail discretionary consumer spending. Gasoline demand edged down 26,000 b/d to 8.524 million b/d week-over-week. On a four-week moving average basis, gasoline demand, at 8.62 million b/d, was 30,000 b/d below year-ago levels.

Imports were 1.037 million b/d, down 136,000 b/d from the previous report, but still considered high enough given demand levels.

Inventories of middle distillates increased 288,000 barrels to 164.366 million barrels, with a drop in demand and higher production behind the build. Week over week, demand for middle distillates was down 209,000 b/d to 3.682 million b/d, with sluggish diesel consumption behind the decline.

Ultra-low-sulfur diesel (ULSD) stocks rose 1.72 million barrels to 115.255 million barrels. Inventories of heating oil edged down 524,000 barrels to 38.644 million barrels. At 164.366 million barrels, middle distillate stocks were 25.564 million barrels greater than the five-year average and 8.174 million barrels more than year-ago levels; the entire surplus against the averages was concentrated in ULSD.

The builds in middle distillates and gasoline were sufficient to offset draws in jet, residual fuel oil, propane and propylene, with total product stocks climbing 1.278 million barrels to 733.026 million barrels. Total U.S. product stocks were 34.795 million barrels stronger than the five-year average and 16.521 million barrels more than year-ago levels.

U.S.oil demand rose 503,000 b/d to 19.342 million b/d, with "other oils" accounting for nearly all of the increase.

Rounding out a bearishly-construed report was the 1.898 million-barrel build in crude stocks, which was less than market expectations but in contrast to Tuesday's 558,000-barrel draw reported by the American Petroleum Institute. At 345.057 million barrels, U.S. crude inventories were 18.386 million barrels more than the five-year average and 13.639 million barrels greater than year-ago levels. The inventory build occurred despite a dip of 109,000 b/d to 8.909 million b/d in imports and an increase in refinery runs of 42,000 b/d to 14.344 million b/d.

Domestic crude production climbed 29,000 b/d to 5.597 million b/d.

The 927,000-barrel decline in crude stocks to 37.407 million barrels at Cushing, Oklahoma – home of the New York Mercantile Exchange (NYMEX) oil futures contracts delivery point -- had the potential to firm the front months of the futures price curve and prevent a pullback in prices, especially given the 526,000-barrel decline in inventories on the Gulf Coast.

Crude stocks in the largely disconnected West Coast region jumped 3.405 million barrels to 49.278 million barrels, blunting the bearish impact of the overall build in inventories.

*Editor’s Note: Linda Rafield’s commentary is based on her knowledge of market trends, information from industry sources, and her own views as a long-time energy analyst. If you require any additional information or would like to interview Linda Rafield, please e-mail Kathleen Tanzy.

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