Crude oil inventories rose 2.35 MMBO last week

Crude oil inventories grew by 2.35 million barrels in the week ended January 13, 2017, according to the EIA. Economists were expecting a build of approximately 0.13 MMBO, according to information compiled by Bloomberg, but the effects of the larger than anticipated gains were offset some by a draw in Cushing, Oklahoma.

Supplies at Cushing, the delivery point for West Texas Intermediate oil, fell by 1.27 MMBO last week, the EIA said in its report. The total amount of crude in storage at Cushing was at 65.7 MMBO in the week ended January 13, 2017.

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“We would be lower if not for the significant drop at Cushing,” Thomas Finlon, director of Energy Analytics Group in Wellington, told Bloomberg. “Imports dropped from very high levels, which explains why crude supplies increased by so much.”

West Texas Intermediate for February delivery, which expires Friday, rose 12 cents to $51.20 a barrel at 1:07 p.m. on the New York Mercantile Exchange. Futures climbed as much as 79 cents before the release of the report at 11 a.m. in Washington. Total volume traded was 17 percent below the 100-day average.

Colder weather prompts a draw on natural gas inventories

The EIA reported both the crude oil and natural gas inventory numbers Thursday due to the holiday on Monday. The natural gas figures showed a draw down in inventories over the course of last week as colder weather increased demand for heating.

Natural gas in storage fell 243 Bcf for the week ended January 13, 2017, above consensus estimates of 236 Bcf. Last week’s weather was 4% colder than last year, and 13% colder than the 5-year average. Since September, weather has been 6% colder than last year but 7% warmer than the 5-year average.

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Colder weather should see crude oil inventories continue to draw down. A forecast from UBS Thursday called for a105-115 Bcf withdraw over the course of the week ended January 20, 2017.

“Over the last month, the weather-adjusted S/D has been 4.1 Bcf/d undersupplied vs. last year and 4.4 Bcf/d undersupplied vs. the 5-year average,” UBS said in its note. “This tightness is driven by demand growth, a 1.1 Bcf/d YoY decline in production over the last month, and low natural gas prices increasing coal-to-natural gas fuel switching by 4.1 Bcf/d in 2015 and 1 Bcf/d in 2016 (although power burns are down on a YoY basis in eleven of the last twelve weeks).”


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