Crude Rises as U.S. Gasoline Supply Drops Most in a Year
By Mark Shenk - Apr 24, 2013 10:46 PM GMT+0530
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West Texas Intermediate crude jumped to the highest level in more than a week as a government report showed that U.S. gasoline stockpiles tumbled the most in a year while oil supplies rose less than analysts estimated.
Futures advanced as much as 2.3 percent after the Energy Information Administration said gasoline inventories fell 3.93 million barrels to 217.8 million last week as fuel demand gained and refineries cut operating rates. Crude supplies climbed 947,000 barrels to 388.6 million. Inventories were projected to increase 2 million barrels, according the median of 11 analyst responses in a Bloomberg survey.
“The gasoline number was profoundly bullish,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “The crude build was smaller than expected and once refineries are back up and running, we might start to see some supply draws.”
WTI crude for June delivery rose $1.98, or 2.2 percent, to $91.16 a barrel at 1:08 p.m. on the New York Mercantile Exchange. The contract touched $91.21, the highest intraday price since April 12. The volume of all futures traded was 4.5 percent below the 100-day average for the time of day.
Brent oil for June settlement advanced $1.45, or 1.4 percent, to $101.76 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 3.4 percent below the 100-day average.
The European benchmark grade was at a premium of $10.60 to WTI, down from $11.13 yesterday.
Gasoline Inventories
The 1.8 percent decline in gasoline stockpiles was the biggest since the week ended April 6, 2012. Supplies of the fuel were projected to fall 600,000 barrels, according to the median of responses in the Bloomberg survey.
“The gasoline inventory number is very bullish,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “The gasoline number had the largest variance from the expectations.”
Gasoline for May delivery rose 1.51 cents, or 0.6 percent, to $2.7341 a gallon on the Nymex. Prices fell to a three-month low yesterday.
Demand for gasoline increased 4.4 percent to 8.75 million barrels a day last week, the highest level since November, the EIA report showed.
Refineries operated at 83.5 percent of capacity last week, down 2.8 percentage points from the seven days ended April 12. Units are often reopened in the spring after being idled for maintenance in late winter as attention shifts away from heating oil and before the peak season for gasoline consumption, which runs from late May until early September.
Driving Season
“It’s late April and attention is starting to shift to gasoline because driving season begins in about a month,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania.
Motiva Enterprises LLC closed the 600,000-barrel-a-day Port Arthur, Texas refinery, the largest in the U.S., after an April 14 power failure, a person familiar with the operations said. Total Petrochemicals U.S. Inc. (FP) reported a fire on April 14 in addition to the power failure that caused “operational upsets” at the company’s 174,000-barrel-a-day plant in Port Arthur.
“The power outage in Port Arthur played a big part in the fall in refinery utilization,” Evans said.
Surging Output
Crude production rose 118,000 barrels a day to 7.33 million, the most since April 1992, according to the EIA, the Energy Department’s statistical unit. Output has surged as the combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in the central U.S. Stockpiles reached a 22-year high of 388.9 million on April 5.
Supplies at the Cushing, Oklahoma, storage hub increased 35,000 barrels to 51.2 million, the EIA reported. Cushing inventories reached a record 51.9 million in January.
Futures also climbed on speculation that European Central Bank policy makers will cut the ECB’s key interest rate to a record low at their May 2 meeting. Banks including UBS AG and Royal Bank of Scotland Group Plc (RBS) forecast that the ECB will reduce borrowing costs to 0.5 percent.
“We’re looking to Europe for guidance today,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The prospect of an ECB rate cut is trumping the supply picture. Crude supplies in the U.S. are ample and production is surging.”
ECB Comments
ECB President Mario Draghi said on April 19 he hasn’t seen any improvement in economic data in the region as a whole, after hinting at the beginning of the month he might lower borrowing costs if the recovery faltered. Executive Board member Joerg Asmussen said a day later that it could trim rates.
The Group of 20 nations approved Japan’s stimulus program at a meeting in Washington late on April 19. The Bank of Japan (8301) plans to buy 7 trillion yen ($70 billion) of bonds a month.
“The world’s central banks are in the driver’s seat right now,” said David McAlvany, chief executive officer of McAlvany Financial Group in Durango, Colorado, which manages $520 million.
Implied volatility for at-the-money WTI options expiring in June was 21.4 percent, down from 23.1 percent yesterday.
Electronic trading volume on the Nymex was 318,891 contracts as of 1:09 p.m. It totaled 622,229 contracts yesterday, 5.9 percent higher than the three-month average. Open interest was 1.72 million contracts.
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