Heating oil stockpiles jump; inventories at Cushing, Okla., rise to new record
Crude-oil futures extended losses Wednesday after government data showed U.S. heating-oil inventories rose much higher than expectations and crude stockpiles at a key delivery point hit a new record high.
Distillate fuel inventories, including heating oil and diesel, jumped 6.4 million barrels in the week ended Jan. 9, the Energy Information Administration reported. Analysts surveyed by energy information provider Platts had expected a gain of 1.7 million barrels.
Meanwhile, crude inventories at Cushing, Okla., the delivery point for crude futures traded on the New York Mercantile Exchange, rose 2.5% to 33 million barrels, up 20% in four weeks. The inventories level is approaching Cushing's operable storage capacity of about 34 million barrels, as estimated by Platts.
"The substantial build in gasoline and diesel as well as a new record for oil supplies at Cushing should add to downward pressure on prices of all petroleum products and crude," said James Williams, an economist at energy research firm WTRG Economics.
After the data, crude oil for February delivery fell $2.10, or 5.6%, to $35.68 a barrel on the New York Mercantile Exchange. It was down less than 2% before the EIA report.
Also on the Nymex, February reformulated gasoline fell 3.1% to $1.1137 a gallon and February heating oil dropped 5.1% to $1.4371 a gallon.
Cushing inventories have been rising on the heels of so-called "contango," meaning the price of a near-term future contract is worth less than oil for delivery in several months. Instead of selling oil at a depressed price, producers and investors are hoarding oil, waiting for prices to rise in a few months. See related stories.
"The high stocks at Cushing means the crude market should stay in contango for a while," said Williams.
EIA report
The EIA, the statistics arm of the Energy Department, also reported that gasoline inventories rose 2.1 million barrels and crude-oil stockpiles gained 1.2 million barrels last week. Analysts had expected gains of 3 million and 1.8 million, respectively.
At 326.6 million barrels, U.S. crude inventories reached their highest level since August 2007.
Total products supplied in the U.S., including gasoline and heating oil, averaged 19.7 million barrels a day over the past four weeks, down 4% compared with the same period last year. U.S. refineries operated at 85.2% of their operable capacity last week, up from the previous week's 84.6%.
The EIA said Tuesday in its monthly report that the global economic downturn will cut into energy demand. Global oil consumption is expected to fall 800,000 barrels per day in 2009. Half of the reduction will come from the U.S., the world's largest oil consumer, the EIA said.
Economic worries
Concerns on the economy were intensified Wednesday after the Commerce Department released gloomy retail sales data.
U.S. seasonally adjusted retail sales plunged 2.7% in December, the department said. Excluding the 0.7% decline in auto sales, retail sales recorded their biggest drop since record-keeping began in the early 1990s, falling 3.1%. See Economic Report.
Troubles in the ailing banking sector continued Wednesday. Deutsche Bank warned that it will report a loss of about 4.8 billion euros ($6.4 billion) for the fourth quarter, while analysts said HSBC Holdings may need to raise $30 billion in equity and slash its dividend in half.
Meanwhile, Citigroup Inc. unveiled a brokerage joint venture with Morgan Stanley late Tuesday, in what could be the first part of a major reorganization of the struggling financial-services giant. See full story on Citigroup.
In other energy trading, February natural-gas futures fell 3.8% to $4.985 per million British thermal units.
