Wednesday, March 10, 2010

It looks like the API is playing catch up to the Department of Energy. A massive crude build according to the American Petroleum Institute, along with big product draws is going to keep the oil market on edge.

The API released another shocker when they said that US oil inventories increased by an incredible 6.5 million barrels. Yet at the same time the API reported big time product draws. For gasoline the API reported supplies fell by 3.18 million barrels and gasoline by almost 3.18 million barrels. Yet is this a case of the API just catching up to the Department of Energy or does it mean something more significant to the marketplace. Last week the DOE said that US crude stocks stood at 341,571 million barrels yet the API’s total stood at 337,090. If you add this week’s 6.5 million barrel API build to last week’s supply it would put you up to 343,590 million barrels. That would put you just over 2.019 million barrels over last week’s Department of Energy total crude stocks. This coincidently is the same consensus estimate increase that the street is looking for. Is the API just playing catch up and does this mean that the DOE will report an increase of around 2 million barrels?

As far as gasoline is concerned, the drawdown of 3.18 million barrels that the API reported reflects strong demand. In fact according to the MasterCard SpendingPulse report gasoline consumption hit the highest level since last July.  According to the report, Bloomberg News said U.S. gasoline consumption reached those lofty levels as West Coast storms subsided and milder weather returned to parts of the Gulf Coast. MasterCard said that motorists bought an average 9.62 million barrels of gasoline a day in the week ended March 5, up 2.5 percent from the week ended July 3, when drivers were filling their tanks for the U.S. Independence Day holiday weekend. Overall gas demand is up 1.5 percent from a year earlier. The API also reported a larger than expected drawdown in distillate supply of 2.8 million barrels. Last week the API total supply was 154,639 million barrels as compared to the Department of Energy which came in at 151,821 a difference surprisingly enough of 2.8 million barrels roughly the same  amount of this week’s drawdown.

Snow storms and delays have played havoc with the numbers but it appears that unless the Department of Energy has big surprises for us, the numbers should get in line. Despite the wild moves we still know that as of right now we are well supplied in every category.

Yet if you believe the latest report from the Department of Energy’s Energy Information Agency this is no time to get complacent. The EIA is getting more optimistic on the global economy and at the same time global oil demand. The EIA projected that world petroleum demand will grow by 270,000 barrels per day to 1.5 million bpd bringing global consumption to near average 85.51 million bpd. Most of that growth is in Asia. In the US the EIA projected economic growth higher saying that GDP will grow by 3.4 percent, compared with 2.3 percent and 2.7 percent growth, respectively. The 2011 forecast for real GDP growth is relatively unchanged at 2.6 percent and 3.5 percent for the United States and the world, respectively.

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