Analysis of U.S. EIA data: U.S. heating oil inventories drop on cold snap

New York - January 13, 2010

U.S. heating oil stocks declined 1.3 million barrels to 41.968 million barrels as demand ticked higher courtesy of a cold snap that battered most of the nation, an analysis of the weekly oil data from the U.S. Energy Information Administration (EIA) showed Wednesday.

Heating oil stocks were 6.489 million barrels below the five-year average and 1.344 million barrels above year-ago levels.

Implied demand for middle distillates edged up 68,000 barrels per day (b/d) to 3.614 million b/d week-over-week. But on a four-week-moving-average basis, demand at 3.701 million b/d, was 4% below year-ago levels. Implied demand is the amount of product that moves through the US distribution system, not actual end consumption.

Middle distillate stocks climbed 1.353 million barrels to 160.410 million barrels. Stocks of middle distillates were still 25.692 million barrels above the five-year average and 16.234 million barrels above year-ago levels, with the surplus residing in ultra-low sulfur diesel (ULSD).

While heating oil stocks fell 1.3 million barrels, inventories of ULSD jumped 2.2 million barrels, reflecting lower levels of rail and road traffic.

Both production and imports of middle distillates were up on the week, resulting in the stock build. Production of middle distillates was up 46,000 b/d to 3.855 million b/d, while imports soared 248,000 b/d to 537,000 b/d, the highest level since December 15, 2006. The increase in imports was across-the-board: ULSD, diesel and heating oil.

CRUDE, GASOLINE IMPORTS UP SHARPLY

Imports of both crude oil and gasoline also rose sharply the week ending January 8. Gasoline imports climbed 108,000 b/d to 892,000 b/d and despite a marked drop off in production, stocks increased 3.791 million barrels. Gasoline production fell 560,000 b/d to 8.511 million b/d, with the Atlantic Coast and West Coast accounting for most of the decline in output. The 330,000 b/d decline in gasoline output on the Atlantic Coast largely reflected ConocoPhillips taking down its fluid catalytic cracker for maintenance.

At 223.492 million barrels, gasoline stocks were 8.656 million barrels above the five-year average and 9.987 million barrels above year-ago levels.

Imports of crude oil also surged as cargoes held out at sea due to end-of-year tax considerations were offloaded.

Crude imports jumped 554,000 b/d to 8.895 million b/d, contributing to a 3.699 million-barrel stock build. Despite a 213,000 b/d increase in crude inputs, the jump in imports was more than enough to offset higher refinery run rates.

The stock build occurred in nearly every region except the Midwest, where imports fell 221,000 b/d to 1.113 million b/d, reflecting an Enbridge line shut down due to an oil leak in North Dakota.

While overall U.S. crude stocks increased, inventories at Cushing, Oklahoma, the home of the New York Mercantile Exchange futures contract delivery point, fell 1.197 million barrels to 34.473 million barrels from the previous week's all-time high of 35.67 million barrels.

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