A 7.1 million barrel fall in US commercial crude stocks last week was the key number in Wednesday's EIA weekly data. NYMEX front-month crude prices burst through $79/barrel for the first time in a knee-jerk reaction to the numbers.
Why the sudden stock draw? Imports fell 674,000 b/d, far outweighing a 337,000 b/d drop in crude runs.
However, the initial reaction might have been overdone, since 4.1 million of the drop was on the US West Coast, which is largely isolated.
In the areas that contain the bulk of the US refining capacity -- the East Coast, Gulf Coast and Midwest, the fall was a combined 4 million, while the Rocky Mountain region, which supplies some crude to the Midwest refineries, rose by 1.1 million barrels.
Overall crude stocks are still more than 26 million barrels above the five-year average, so it is not as if refineries are running dry.
A possible area of concern that the market may be underplaying is the tightness in gasoline supplies. US stocks fell another 700,000 barrels last week to just over 190.4 million barrels, the lowest since September 2, 2005. Demand cover rose to 20.27 days, but is running nearly 2 days below last year and the five-year average. Yet the RBOB crack spread is mired just above $4/barrel.
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