Oil futures drop as US inventory soars

15 January 2009

Prices of crude oil fell yesterday after a US government agency reported that stocks have climbed to a 16-month high, as fuel demand continues to tumble. The Energy Information Administration said in its weekly report that stocks have risen for the third straight week.

Commercial stocks of crude in the United States rose by 1.2 million barrels to 326.6 million barrels, well below estimates for a 2.2 million barrel rise.

The data for the week ended 9 January showed that supplies of distillates, which include heating oil and diesel, shot up by a whopping 6.4 million barrels to 144.2 million barrels, nearly six times the forecast of 1.1 million. The big distillates rise was a surprise since stocks usually deplete during the winter months.

The build-up came as refinery output of middle distillates rose 116,000 barrels per day last week while demand stayed soft, at 4.10 million bpd over the past four weeks, down 2.4 per cent from a year ago. Demand for gasoline remained weak too, helping inventories rise 2.1 million barrels to 213.5 million barrels last week. That topped estimates for an inventory increase of 1.6 million barrels.

Distillates and gasoline supplies rose for the sixth straight week. Futures are down 61 percent from a year ago. Oil traded at $37.23 a barrel before the release of the report at 10:30 a.m. in Washington.

Inventories at Cushing, Oklahoma, where the oil traded on Nymex is stored, climbed 2.5 per cent to 33 million barrels last week, the highest since at least April 2004, when the department began keeping track of supplies there.