Crude Falls to Fresh Lows

Severe floods in the Midwest during the previous week forced several companies to shutdown oil pipelines in and out of Cushing (located in PADD 2), which can help explain the large build in stocks there and lower utilization rates at Midwest refineries. That’s because a report released Wednesday showed a sharp increase in gasoline inventories.

Futures fell 4.4% to the closing price on expectations of publication of data on oil reserves in the U.S. On Tuesday, the decline made up 2.2% compared to Monday. “Even with the inventory decline we have a surfeit of crude”.

“The spectacular build in gasoline supplies is just going to crush the market”, said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. U.S. oil inventories probably increased by 500,000 barrels last week, according to a Bloomberg survey before Energy Information Administration data Wednesday.

Front month gasoline futures were down more than 6 percent at $1.17 a gallon on the Nymex as the government report added to earlier weakness. USA commercial crude inventories decreased by 5.1 million barrels last week, maintaining a total US commercial crude inventory of 482.3 million barrels. Such drastically low prices were last seen in the summer of 2004.

OPEC’s no-change stance is aimed at pushing oil prices lower to squeeze less-competitive players, including United States shale producers, out of the market.

“A significant amount of people were not working last week, and were on vacation as refiners were still cranking out the gasoline and it went into inventories”, said Lipow.

Nationwide gasoline supplies rose by 7.1 million barrels and distillates by 5.6 million barrels. Citigroup described the tensions as “indeterminate” for oil markets in the near term, saying there’s less chance that the Saudis will cut crude output ahead of Iran’s return to the market following the removal of Global sanctions.

Global benchmark Brent crude futures fell to new 11-year lows of $33.09 per barrel on Thursday, undercutting a low from a day earlier, although prices edged back to $33.52 per barrel by 0213 GMT.

Refinery crude runs fell by 65,000 barrels per day, EIA data showed. “Prices would normally surge if you had ISIS attacks on oil facilities in Libya, a serious escalation in tensions between Saudi Arabia and Iran, and limited spare capacity”.