New Day, New Record
Crude oil hit a new record of $112.20 on Wednesday on a sharp drop in crude inventories. The spike in oil prices also sent the average price of gasoline to a new record at $3.343 per gallon according to AAA and the Oil Price Information Service.
Crude inventories fell -3.2 million barrels in the weekly EIA report when analysts were expecting an increase of 2.4 million barrels. A sharp drop in crude imports were blamed for the decline. In the prior week a surge of imports caused a +7.3 million barrel gain. Last week was obviously an anomaly caused by a bunching of deliveries in the week and this week was the slack period as the calendar caught up. Gasoline inventories fell another -3.4 million barrels stretching their consecutive losing streak to 4-weeks and -14.6 million barrels. There is still no shortage with inventory levels at 15-year highs.
Gasoline demand fell -2% last week as higher prices continued to depress driving habits.
Refiner capacity utilization rose slightly to 83.0% but remains historically low as refiners use the surplus of gasoline inventories and low crack spreads as an excuse to take capacity offline for routine maintenance.
The weekly inventory reports cause considerable volatility but it is just smoke that clouds the overall picture. Overall crude levels are just fine at 53 days of supply and gasoline is well above the 5-year average and at 15-year highs. Demand is down and prices up. Prices are not being supported by fundamentals but by speculation over potential shortages later this summer.Jim Brown