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New York petroleum futures continued to move lower Sep 12 as
perceptions of ample global crude supply overshadowed a tight US
gasoline market. October crude ended the day 75 cts lower at
$63.33/bbl on the New York Mercantile Exchange, paring losses late
in the session. October unleaded gasoline fell 8.6 cts to
$1.8737/gal and October heating oil settled 8.22 cts lower at
$1.8143/gal.
"On the [International Energy Agency] figures, OPEC is already
oversupplying the market with crude oil, yet the IEA has itself
just dumped another huge quantity on the market out of strategic
reserves," Kevin Norrish, energy analyst at Barclays Capital, said
in a report. "...it does not seem reasonable to expect OPEC to
produce more in a market where the availability of crude oil is
not an issue."
The IEA said OPEC output in August was 29.7-mil bbl, and a Platts
survey put production at 30.26-mil b/d (on 9/12). On Sep 2, the
IEA requested its members release 60-mil bbl of oil inventories,
30-mil of which will come from US reserves (ON 9/6). Gasoline was
still viewed by analysts as the market with the most upside risk.
An added 4-mil bbl drop in US gasoline inventories, on top of the
reported 4.3-mil bbl, was not taken into account in last week's
weekly stock data, according to a report Sep 12 by Jacques
Rousseau, analyst with Friedman Billings Ramsey.
The Department of Energy last week reported US gasoline stocks
fell 4.3-mil bbl for the week ended Sep 2, when Hurricane Katrina
hit the Gulf Coast and knocked out refining capacity. That figure
was significantly lower than trader expectations of a 6.5-mil bbl
drop. "The limited gasoline inventory drawdown (-4.3-mil bbl)
reported by the Department of Energy (DOE) last week, despite
upwards of 20% of total US refining capacity being shut down or
operating at reduced rates, lead us to dig a little deeper into
the data," said Rousseau. He said the "net result" was "an
additional 4-mil bbl drop in gasoline inventories related to last
week that should either be reported in future data via higher
implied demand or a revision."
"Additionally, due to the extent of the damage, we anticipate
gasoline inventories will continue to fall over the next few
months, supporting strong refining margins," said Rousseau. "A
gradual decline in inventories may not cause retail gasoline
prices to spike to $4/gal, but it should keep prices at the $3/gal
level for longer."
He said his conclusions were based on "demand comparisons, lost
refinery production, and estimating the depleted inventories at
retail stations." Rousseau estimated 1.8-mil b/d of refining
capacity was shut down for the entire week and another 2.4-mil b/d
ran at reduced rates. "Assuming that these refineries normally run
at a 90% utilization rate and that approximately 50% of the
product yield is gasoline, then inventories should have declined
by about 8.2-mil bbl, not 4.3-mil bbl," he said.
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