RBOB Ignores Soft Demand
The market settled mixed Wednesday after the weekly DOE inventory update showed crude stocks increased less than expected and overall demand was weak. RBOB managed to overcome weak fundamentals, making a strong move up of 477 points before the close to settle at 2.9752. Heating oil moved down 14 points to settle at 3.1895 after recovering from a near three cent loss earlier in the session. Meanwhile, crude moved up 30 cents to 98.71. The weekly inventory update appeared as shown below:
|
|
Stocks
|
Wkly Change
|
Yearly Change
|
Demand
|
Change
|
Production
|
Change
|
Imports
|
Change
|
|
Gasoline
|
231.8
|
1.63
|
-9.1
|
8.039
|
.021
|
8.626
|
.115
|
.715
|
-.330
|
|
Distillates
|
146.6
|
1.2
|
-17.8
|
3.436
|
-.300
|
4.489
|
-.032
|
.111
|
-.081
|
|
Crude
|
339.2
|
.3
|
-5.8
|
14.685
|
.178
|
5.763
|
.043
|
8.414
|
-.466
|
|
Runs
|
82.8%
|
1.0%
|
-1.9%
|
(Stock values in 1,000,000 42-gallon bbls)
The crude stock build was in sharp contrast to the reported API draw Tuesday. Offsetting the stock increase was the 466,000 bpd drop in crude imports. Refiners raised utilization rates by 1% after reducing rates for three consecutive weeks. At Cushing, OK, the NYMEX hub, crude stocks increased 367,000 bbls to 30.490 million bbls which is about 2.2 million bbls above the five-year average. Analysts indicate pipeline space running into Cushing continues to rise, suggesting inventories could increase even more.
Gasoline stocks increased slightly above analysts’ expectations but much less than the 4.429 million bbl build reported by API. Stocks on the Atlantic Coast, home of the NYMEX-delivered RBOB contract, were up a marginal 7,000 bbls to 62.633 million bbls, but managed to reach a level not seen since March 4, 2011. Gasoline demand showed little improvement and is 830,000 bpd below the five-year average.
The distillate stock increase was also counter to expectations of a draw. Demand softened, falling 300,000 bpd after shedding 150,000 bpd the previous week. Breaking down the increase, heating oil stocks were up 586,000 bbls and diesel stocks increased 588,000 bbls.
Overall, U.S. petroleum demand fell by 4.8% to a four-week average of 18.1 million bpd, which is reportedly the weakest four-week average since 1997.
Investors in Holding Pattern
After three days of delays, Greek government leaders were meeting in Athens Wednesday to finalize a deal on steep cutbacks in public spending demanded by the country’s lenders. U.S. stocks were mixed during Wednesday’s session as investors waited for news about whether the deal would be reached. The DJIA settled up 5.75 at 12,883.95.
Greek Leaders Finally Agree
Reports this morning indicate Greek Prime Minister Lucas Papademos and his coalition partners have struck a deal on new cuts demanded by creditors to secure a vital euro130 billion bailout. According to the prime minister’s office, the agreement with the majority Socialists and the conservatives will allow alternative cuts to those rejected in yesterday’s meeting. Although all the other cuts demanded by Greece’s Eurozone partners and the International Monetary fund were approved, party leaders had balked at new pension cuts.
Increased Production/Lower Demand
In its latest monthly oil report, OPEC lowered its forecast of the call on OPEC crude for 2012 as a whole to 30.04 million bpd from the 30.15 million bpd projected a month ago. OPEC’s 12 member countries produced an average of 30.898 million bpd in January, nearly 900,000 bpd more than their new output ceiling which came into effect at the beginning of the year and some 1.35 million bpd above expected demand for OPEC crude in the first quarter. OPEC’s December agreement set an output ceiling of 30 million bpd for all 12 members; however, it did not include individual quotas and any reining in of production will be entirely on a voluntary basis. Looking ahead, OPEC has made slight quarterly adjustments to its forecast of demand. Second quarter demand is now seen at 28.9 million bpd, some 80,000 bpd lower than originally forecast, third quarter is barely changed at 30.85 million bpd and fourth quarter is trimmed by 90,000 bpd to 30.82 million bpd.
Best Job Growth Since Last Spring
The Labor Department reported today that the number of people seeking unemployment aid neared a four-year low last week, offering investors an encouraging sign that strong hiring could continue. Weekly applications for unemployment benefits fell 15,000 to a seasonally adjusted 358,000, the second-lowest level since April 2008. The four-week average, a less volatile measure, fell to 366,250.
Today’s Trend
Crude is approaching the $100/bbl level again this morning supported by reports Greek politicians have reached an austerity deal. This news, along with geopolitical tensions between Iran and the West, is overriding bearish DOE implications and OPEC’s report cutting 2012 forecast demand.
Currently heating oil is up 115 points, RBOB is up 320 points and crude is trading 1.10 higher.
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