EIA’s Petroleum Report Didn’t Give the Market What It Wanted

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“The market wants to see inventory draws and the evidence that oil is being consumed,” Jonathan Barratt, chief executive officer of the commodity newsletter Barratt’s Bulletin, told Bloomberg ahead of the Energy Information Administration’s weekly Petroleum Status report. “If we do see a stockpile build, I think we’ll see prices head to the downside,” he said, predicting that oil futures would fall to $92.50 per barrel.

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While the last week’s data showed that U.S. stockpiles fell, levels have only retreated slightly from their eight-decade high in the past few weeks, keeping prices down.

For the week ended May 17, the Energy Department’s statistical arm — the EIA — reported that commercial crude inventories in the United States decreased by 300,000 barrels, bringing down the total stockpile to 394.6 million barrels. Despite the decrease, inventories remain well above the upper limit of the five-year average for this time of year. Nationwide crude supplies dropped to 394.6 million barrels last week after climbing to 395.5 million in the week ended May 3, the highest level recorded since 1931.

At Cushing, Oklahoma, the delivery point for the West Texas Intermediate oil future contracts, stockpiles increased for a second week.“The build in Cushing is another bearish surprise that should keep the downward pressure on the market,” Energy Analytics Group director Tom Finlon told the publication.

A Bloomberg survey of analysts predicted that government figures would show a 1 million-barrel decline in nationwide oil stockpiles.

Before the EIA reports its figures, industry group The American Petroleum Institute announced Tuesday that that crude stockpiles increased by 532,000 barrels last week, sending oil futures down as much as 0.9 percent. The API sources inventory data on a voluntary basis from operators of refineries, bulk terminals, and pipelines, and the federal government requires that reports be filed with the EIA for its weekly survey. Once the EIA’s report was released, WTI oil for July delivery fell slid a further 1.3 percent, to $94.93 per barrel, on the New York Mercantile Exchange.

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Alongside the increase in crude oil stockpiles, gasoline inventories grew by 3.02 million barrels to a total of 220.7 million. Supplies were forecast to drop by 300,000 barrels, and “the unexpected gain in gasoline supplies is obviously bearish for the entire petroleum complex,” said Finlon. While consumption of gasoline over the past four weeks increased to 8.5 million barrels per day from the previous period’s 8.4 million, it still remained below the 8.79-million-barrel level recorded a year ago. “There’s no demand for gasoline,” Finlon said. “The data shows that demand rose last week but the inventory gain paints a bearish picture. There was no measurable movement to wholesalers or retailers ahead of Memorial Day,” which typically kicks off the summer driving season.

Testimony made by Federal Reserve Chairman Ben Bernanke at the Joint Economic Committee of Congress in Washington pushed futures to the day’s low. He noted that because the United States economy remains weak thanks to high unemployment and March’s government spending cuts, tightening monetary policy too soon would endanger the recovery.

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