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Oil supplies outpace the market, driving prices down

by Rafael Bernal
June 06, 2012


Crude oil inventories remained stable last week at 384.6 million barrels compared with 384.7 million a week earlier, according to a report issued by the U.S. Energy Information Administration.

 

Refinery inputs rose to 15.2 million barrels a day from 14.9 million barrels a day a week ago. Capacity utilization rose slightly to 91 percent.

Praveen Narra, an analyst at Raymond James & Associates Inc, attributed the increase in refinery use to the beginning of driving season. Regular gasoline prices dropped to $3.61 a gallon from $3.67 a gallon a week earlier. Motor gasoline inventories increased by 3.3 million barrels to 203.5 million barrels to meet with a predicted increase in demand.

However, “supply is going faster than we can keep up with,” according to Narra. New rigs opened earlier this year because of high oil prices and the foreseen long-term stability in the natural gas market. Narra said, “drilling moving from gas to oil led to an increase in [oil] production.” West Texas Intermediate crude traded as high as $109.95 per barrel in the past year, leading drillers seeking high rates of return to open more rigs. WTI now trades at $85.46 a barrel, down 5.7 percent from $90.64 a week ago.