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EIA Inventory Preview

Jim Perez

Crude oil stocks are anticipated to drop 0.5 MB this week compared to a 1.3 MB decline in the five-year average.

The biggest factor in this week’s numbers will be refinery utilization, in our view, as it was the most significant in last week’s inventory increase. Seven refineries were shut or went to reduced rates in that week due to Hurricane Sandy, and five returned to full processing rates last week.

The return of refining should reduce inventories as more oil is processed. Imports were surprisingly higher last week and grew the most on the east coast despite the storm. It’s difficult to assess the import situation this week when the closure of ports in NY led to increased imports while the reopening of the Keystone pipeline in the Midwest led to a decrease in PADD 2.

Gasoline inventories benefited from Sandy in last week’s report by gaining 2.9 MB. The east coast fell 1.2 MB while the Gulf Coast saw the largest increase of 4.6 MB, likely due to the shutdown of the Colonial pipeline. The restart of that pipeline along with the inability of refiners to deliver gasoline to end-users could lead to another build this week of 0.8 MB. Distillate inventories could grow as well and we’re looking for a build of 0.5 MB.
Natural gas inventories are anticipated to fall 19 bcf this week, compared to a five-year average build of 17 bcf.

The predicted draw would end the injection season two weeks early. Such a reduction in inventories may not appear to be in-line with the above-normal temperatures that were forecast by NOAA during the last two weeks, however, stronger demand for heating likely took place in the eastern population-weighted consumption areas where cooler temperatures were observed.

A 19 bcf draw would put inventories at 3,910 bcf, and would make last week’s reading of 3,929 bcf a record high for the year. That would be only 77 bcf above last year’s record, and end the injection season with a much smaller surplus than was feared earlier this year. It could become a bullish catalyst later this week.

*The API convergence figures are the amounts that EIA data need to change in order to match the previous day’s API figures.