Crude oil prices shot up yesterday after the Department of Energy published its weekly storage estimates, showing inventories had fallen by 8.4m barrels – much more than expected.
The market consensus forecast was for a decline of only 1.3m – so what explains this? Underlying demand didn’t seem to improve much: refinery utilisation was up 0.5 per cent to 84 per cent, but that is still historically poor.
A big component was a fall in crude imports to 8.4m – down 15 per cent. Theories included delays to shipments or even diversion of shipments to take advantage of the historically high premium for Brent crude over West Texas Intermediate. But as Stephen Schork points out, the week-on-week fall in the level of crude imports was the sixth-highest recorded since February 2002 . And this time, there is no clear story:
Of the five larger pullbacks, the largest, February 06, 2004 (-19½%) was the result of fog-related closures to GoM shipping channels. The next, December 27th, 2002 (-16.6%) resulted from the precipitous drop in imports from Venezuela related to the PdVSA led general strike. The last three were all related to hurricane disruptions… September 2005’s Katrina/Rita (-16.2%); last September’s Gustav/Ike (-16.1%) and September
2004’s Ivan (-15.01%).
Of course demand for imports, Schork notes, is not exactly high right now.
Be that as it may, a 15% weekon- week decline in the current trend does not pass the test of mathematical reasonableness. Unlike the five larger drops, there was no ‘story’ to help reconcile the number. Perhaps TS Claudette and a brief closure of the Port Arthur intracoastal waterway disrupted some vessel traffic, but we doubt it was enough to justify the reported decline in shipments.
So, what could it be? Perhaps some of those ships that would have normally docked are just floating around, keeping tabs on their contango prospects? Morgan Downey provides this chart:
Oil rebounds following inventories data (FT, 19/08/09)
Is floating storage being restocked? (FT Alphaville, 17/06/09)