Crude Oil Inventory Watch: Week Ending 7/09/2010

Total petroleum inventories increased slightly less than the 5-year average. The surplus stands at 65.494 million, or 6.3% above the 5-year average, down from 6.4% in the prior week.



Crude oil inventories fell sharply last week, as refinery utilization increased and crude imports and production fell. The 5 million barrel withdrawal was much greater than the 212,000 5-year average. The overall surplus to the 5-year average decreased to 23.285 million barrels, or 7.1%, down from 8.5% a week ago.



Movements in product inventories were decidedly bearish, with gasoline stocks now nearly 10 million barrels, or 4.5% above the 5-year average. Distillate inventories are 30.4 million barrels, or 23% above the 5-year average. The equities of refiners are down across the board following the news.





Demand

Demand plummeted last week, as total petroleum demand registered the largest year-over-year decline since February. Both gasoline and distillate demand experienced steep declines. The four-week averages are still positive, however, with total petroleum demand up 4.6%, gasoline demand up 1.8%, and distillate demand up 12.9%.







Imports

Crude oil imports averaged 9.3 million barrels per day over the last four week period, which is 0.217 million barrels above the same period a year ago. Total petroleum imports plunged in the week ago period, led by a 681,000 week-over-week decline in product imports.







Refinery Activity

Refinery utilization increased 0.7% week-over-week, from 89.8% to 90.5%, which is the highest level since January 2008. Both gasoline and distillate production benefitted, with production increasing 141,000 barrels per day and 103,000 barrels per day, respectively. At 9.508 million barrels per day, gasoline production is at the highest level ever. Incidentally, gasoline demand peaked in 2007, when it averaged nearly 9.3 million barrels per day. Year-to-date, gasoline demand has averaged slightly above 9 million barrels per day.







Miscellaneous

U.S. crude oil production fell 1.1% from last week. Year-to-date oil output is up 3.5% from the year ago period.



Inventories at the NYMEX delivery point, Cushing, Oklahoma, increased 0.3 million barrels. Prompt month calendar spreads are currently -0.42, down from -0.56 last week. Spreads are the narrowest since March.