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Commercial crude oil inventories fell by 1.5 million barrels last week, just 100,000 barrels shy of the consensus estimate. Oil stocks fell by 6.3 million barrels, to 291.7 million, the previous week.
Going into the report, crude oil futures traded with a firmer tone as traders began focusing on global supplies. The crude oil market slipped into backwardation last week (see "Oil's Creeping Backwardation"), indicating the market's supply concerns, after a four-month sojourn into contango.
According to EIA, domestic refinery usage plunged to 66.7% last week, a further drop from the 77.4% utilization rate of the previous week. As a result, gasoline production fell to an average 8 million barrels per day, while distillate fuel production, including the refining of diesel and heating oil, slipped to a daily average of 3.3 million barrels.
Gasoline inventories declined by a larger-than-expected 5.9-million-barrel margin last week, despite analysts' forecasts for a 3.5-million-barrel drop. EIA figures indicate motor fuel demand has dropped 3.5% over the past 12 months.
Forecasts for a 1-million-barrel decline in distillate fuel stocks, too, were overly optimistic. EIA says inventories dropped by 4.2 million barrels as demand slipped 5.5% from year-ago levels.
In all, analysts were 1-for-4 on forecasts this week.
At least there was some comfort available in watching the oil market return to a semblance of normalcy. The NYMEX crack spread flipped back into positive territory Tuesday following the expiration of the October crude oil delivery. On Monday, the spread turned negative when an apparent short squeeze in the then-spot contract pushed the immediate cost of crude well above the proceeds obtainable through the sale of gasoline and heating oil (the crack spread's explained in "Time For Crack Spreads? ).
NYMEX Crack Spread/Refining Margin
The natural gas market also bounced back from Monday's disruption. Crude oil's premium over natural gas had been in a seasonal downturn until the spot crude market turned squirrelly.
On Monday, the premium ballooned to more than $13 mmBTU (million British thermal units) after a three-week decline to below $9 mmBTU.
Spot Crude Oil Premium Vs. Natural Gas
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