I don’t think I have ever seen the forecasters miss the estimate this badly. They were forecasting a 300,000 barrel decline in gasoline stocks, and instead got a 5 million barrel decline. For the first time in a long time, inventories are now in the lower half of the normal range.
Summary of Weekly Petroleum Data for the Week Ending March 30, 2007
Here was CNN’s take on it:
Oil prices swing wildly on Iran, gasoline
In its report, the Energy Information Administration said gasoline stocks, closely watched ahead of the summer driving season, plummeted by 5 million barrels. Analysts were looking for a small drop of just 300,000 barrels, according to Reuters. The fall in gasoline supplies pushed gasoline stocks to the lower end of their average range, the first time in several months the supplies have dipped below average.
One analyst noted that the Iran situation had pushed up oil prices $2 to $3 over the last couple of weeks, and credited the big fall in gas stocks with preventing a similar selloff.
“We’re nowhere near where we should be in terms of inventories,” said John Kilduff, an energy analyst at Fimat in New York, who also pointed to strong gasoline demand numbers in the report. “We’re seeing the kind of numbers we only see during the peak summer season.”
Kilduff also noted the relatively low rate of refinery operation, which EIA said was at 87 percent capacity last week.
“The failure of the refinery rate to go to 90 percent is spelling lots of trouble for us,” he said.
Crude inventories were up more than expected, and crude imports are running at a higher level than at this time last year:
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose by 4.3 million barrels compared to the previous week. At 332.7 million barrels, U.S. crude oil inventories are above the upper end of the average range for this time of year.
U.S. crude oil imports averaged over 10.2 million barrels per day last week, up 613,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged over 10.0 million barrels per day, or 196,000 barrels per day more than averaged over the same four-week period last year.
If gasoline inventories don’t turn upward within the next week or so, expect to see them make another strong run past $3.00/gallon.
Any theories as to why they missed so badly? Is the unexpected drop attributable to one or more specific events? Is this an honest mistake, or a symptom of a koolaid-drinking state of denial among analysts?
It is a combination of things. First, demand has been incredibly high throughout the winter. That has kept pressure on inventories. Second, I think they were expecting that refinery turnaround season passed peak and they were on the way back up. As I said last week, it wouldn’t surprise me to see another dip because it is a bit early for turnaround season to be winding down. I expect to see gasoline inventories start to climb by the end of the month, but we are entering high demand season in worse shape than we have been in for a long time.
The only thing keeping the markets from going nuts today is that the Iranians are releasing their British captives. Take that news away and I think oil and gas both make a very strong move up.
Cheers, Robert
Other than as an emotional reaction, why would oil prices go up in concert with gasoline given that oil stocks are high?
Hello R-squared,
Just dropping a note to say hi! Hope you and your family are getting all settled in Scotland. Take care, and I hope you will rejoin TOD at some future point.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?