Inventories
The Department of Energy reported that in the week ending July 16, 2010, U.S. crude oil inventories increased by 0.4 million barrels, gasoline inventories increased by 1.1 million barrels, distillate inventories increased by 3.9 million barrels, and total petroleum inventories increased 5.1 million barrels. While crude oil inventories finally managed to reverse some of the steep withdrawals of the past two weeks, product inventories added to their steep builds on the back of ever-increasing refinery utilization, which reached 91.5%, the highest level since August of 2007. Crude oil prices were up about $0.30 preceding the DOE report, but proceeded to sell off after the release.
Total petroleum inventories increased much more than the 5-year average. The surplus now stands at 68.860 million, or 6.6% above the 5-year average, up from 6.3% in the prior week. It was the first increase in the surplus since the week ending May 21, 2010.
Crude oil inventories increased counter-seasonally, after falling nearly 10 million barrels over the prior two weeks. The overall surplus to the 5-year average increased to 24.980 million barrels, or 7.6%, up from 7.1% a week ago.
Product inventories continue to rise relentlessly on the back of multi-year highs in refinery utilization. Gasoline inventories are 10.787, or 5.1% above the 5-year average, while distillate inventories are 32.584, or 24.3% above the 5-year average. Both gasoline and distillate inventories are at or near record seasonal levels.
Demand
Demand increased after plummeting last week, but the year-over-year comparisons are getting more difficult. Distillate demand in particular continued to fall, registering its first YOY decline since April. On a four-week average basis, total petroleum demand is up 3% from the year ago period, gasoline demand is up 2%, and distillate demand is up 10.9%.
Imports
Crude oil imports averaged 9.5 million barrels per day over the last four week period, which is 0.203 million barrels above the same period a year ago.
Refinery Activity
Refinery utilization ticked higher for the third consecutive week, reaching its highest level since August 2007. Gasoline production fell from last week’s record level, but distillate production increased and now stands 457,000 barrels per day higher than a year ago. Such high levels of distillate production on top of the record inventory surplus bodes poorly for refining margins.
Miscellaneous
U.S. crude oil production increased 2% from last week. Year-to-date oil output is up 3.6% from the year ago period.
Inventories at the NYMEX delivery point, Cushing, Oklahoma, increased 1.0 million barrels. Cushing inventories are only 841,000 barrels below the record levels set in May, yet calendar spreads are -0.42 now versus upwards of -4.59 back in May.
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