By Brad Zigler
Crude oil continued to fall today, in anticipation of Canadian pipeline operator Enbridge's moves to reopen its biggest US-bound supply line. Yesterday's estimate of a buildup in US crude oil inventories by the American Petroleum Institute also weighed heavily on prices.
Analysts expected that this morning's US Energy Department inventory report would reflect a drop in crude oil stocks between 2.2 million and 2.6 million barrels. In contrast, the API figured that inventories would rise by 3.3 million barrels.
Crude oil stockpiles actually decreased by 2.5 million barrels according to government data.
The API also estimated that gasoline stocks dropped by 963,000 barrels, versus analysts' forecast for a decline between 625,000 and 1.1 million barrels.
The Energy Department's definitive figures — a drawdown of 700,000 barrels — pretty much split expectations down the middle.
Distillate fuel supplies, including heating oil and diesel, were seen falling 1.5 million barrels by the API, against analysts' predictions of a 300,000-barrel gain.
Analysts got the number right, but not the signage. According to government data, distillate fuel inventories decreased, rather than increased, by 300,000 barrels.
Refinery usage, previously at 88.2 percent, was expected to fall to 87.6 percent. Utilization guesses were dead-on. Gasoline production decreased to a daily average of 9.2 million barrels, while distillate fuel output stepped up to 4.4 million barrels.
Gasoline demand, according to the Energy Department, averaged 9.3 million barrels per day, up 0.5 percent from year-ago levels. Average daily consumption of distillate fuels was pegged at 3.8 million barrels, up 11.5 percent from this time last year.
Trading Week
For the week ending Tuesday, NYMEX WTI crude gained 3.7 percent to $76.80 a barrel. Products were more sluggish. Unleaded gasoline rose 1.7 percent and heating oil picked up 2.3 percent. Refining margins were flattened this week as gasoline-heavy operators grossed 10.8 percent, 1.9 points less than last week. Distillate-rich refinery runs, at 12.4 percent, brought in 1.8 points less.
Average daily NYMEX crude volume climbed 17.1 percent to 872,740 contracts. Open interest fell 62,608 contracts to 1.323 million on short covering.
Contango shrank this week, putting to death a three-week carry market. The average cost of a three-month WTI roll fell from $3.99 a barrel to $3.07. At its peak on Sept. 7, a 3.3 percent net return — equivalent to 13.2 percent, annualized — could be earned for a three-month store.
Largely because of pipeline-related supply constraints, WTI's discount to Brent crude shrank from $2.13 a barrel to $1.86.
The Chicago corn/ethanol crush reached a new high at $1.90 a bushel this week, as high corn prices were more than matched by gains in the price of the alcohol fuel. Ethanol is now pricier than unleaded gasoline.
Technical Picture
Crude oil prices had been buoyed by the pipeline outage but are now struggling to break above a 50 percent retracement of August's $12-a-barrel decline.
Bulls' upside objective — and probable resistance — is spot's $78.31 level. Support should be anticipated at $75.42 and further below at spot's 10-day moving average of $74.81.
Nearby NYMEX WTI Crude Oil
(Click to enlarge)
Momentum and relative strength were waning going into the overnight trading session on Wednesday, though MACD and stochastics indicators remained bullish, if not actually overbought. Prices actually softened more than $2 a barrel in electronic trading ahead of this morning's inventory report, but recovered a bit in the early floor session.
Disclosure: No positions
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