Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=185512
Story Retrieval Date: 5/20/2013 1:08:19 AM CST
U.S. Energy Information Administration/Anjelica Tan/MEDILL
Crude oil inventories rose a surprise 1.7 percent, or 6.2 million barrels, to 363.1 million barrels, in the week ended April 22, according to the report released Wednesday by the U.S. Energy Information Administration.
Analysts surveyed by Dow Jones Newswires were expecting crude stockpiles to increase by only 0.25 percent, or 0.9 million barrels.
“It was a bit of a surprise,” said Phil Flynn, an energy analyst at PFGBest in Chicago. “The market was almost blindsided by the buildup in oil.”
Flynn said refinery glitches last week were partly to blame, but an increase in imports and low refinery utilization also contributed to the unexpected jump in crude stocks.
U.S. crude imports rose by 1.2 million barrels per day to 9.3 million barrels per day last week, higher than the four-week trailing average of 8.7 million barrels per day.
Crude oil futures traded on the New York Mercantile Exchange closed at $112.76 Wednesday, up 55 cents from Tuesday’s close.
Amid the unrest in Libya and Syria, Flynn believes the Middle East, and OPEC in particular, is increasing oil production, contributing to more U.S. imports.
Mike Zarembski, senior commodities analyst at optionsXpress in Chicago, said refineries couldn’t handle all of the supplies from the sharp increase in imports.
Refineries operated at 82.7 percent of capacity, up slightly from the prior week but still considered low compared with 89.0 percent a year ago, according to energy analyst Tim Evans of Citi Futures Perspective in New York.
“The low rate means we’re consuming less crude oil, and so those inventories jumped last week,” Evans said. “And it also means we’re limiting the output of distillates and gasoline.”
Motor gasoline inventories fell by 2.5 million barrels to 205.6 million, according to the EIA. The levels are 8.1 percent lower than the 223.7 million barrels in stock last year.
“My guess is that refiners are concerned about demand weakness due to high prices, and so they are being cautious in terms of how much crude oil they are turning into products,” Evans said.
The national average price for a gallon of regular gasoline was $3.879 Wednesday, up $0.042 from last week and $1.021 above the year ago average, according to the AAA Daily Fuel Gauge Report. In Chicago, regular gasoline averaged $4.30 per gallon, up $0.078 from last week and $1.187 above the year ago average.
Flynn said a major power outage in Texas on Tuesday halted 4 percent of the U.S. refining capacity, which he expects to negatively impact gasoline inventories next week. Lower supplies mean consumers can expect to see high prices continue at the pump.
“Going into summer, it will be interesting to see if consumers really cut back or get used to these levels,” Zarembski said. “But unless we see a new high, say $5 a gallon, I don’t think we’ll see any sharp decreases in demand.”