Storm Delays Government Energy Report

Real-time Monetary Inflation (last 12 months): 1.8%

The national oil inventory report normally released by the U.S. Energy Information Administration on Wednesday morning will be delayed until Friday, Feb. 12 due to inclement weather. The EIA remains closed, along with the rest of nonessential federal government services in Washington, in the wake of last weekend's heavy snow, dubbed "Snowmageddon" by the administration.

Despite the government shutdown, private sector prognosticators busied themselves with the usual guesswork on petroleum stocks Tuesday.

The American Petroleum Institute estimated that domestic crude oil supplies rose by 7.2 million barrels from 329 million, along with a 1.6-million-barrel build in gasoline inventories. The API also saw a drawdown of 1.5 million barrels in distillate fuels, including heating oil and diesel.

Analysts estimated a much more modest build in crude stocks, ranging from 1.4 million to 1.5 million barrels. Oil Patch watchers also forecast gasoline supplies rising anywhere from 200,000 to 500,000 barrels and distillate stores falling by 1.8 million to 1.9 million barrels.

Refinery runs were expected to increase to a 78 percent utilization rate.

Yesterday, NYMEX crude oil for March delivery closed $1.86, or 2.6 percent, higher on a wave of fresh buying encouraged by rumors of a negotiated guarantee for Greek sovereign debt. Bulls were also emboldened by an upward revision in OPEC's current oil demand forecast.

For the week, crude oil prices are off 3.5 percent, gasoline is down 3.8 percent and heating oil has sunk 4.8 percent. The disparate falloff in product prices boosted the yield of gasoline-heavy 3-2-1 refining operations to a 14.6 percent margin, while distillate-rich 2-1-1 refiners grossed 13.6 percent.

Sweeter, lighter West Texas Intermediate crude cheapened this week in relation to North Sea Brent. WTI's per-barrel premium shrank to $1.81 from last week's $2.33 average.

Contango also narrowed this week as the three-month NYMEX forward roll came in to $1.48 a barrel from $1.64.

Despite yesterday's inflow of fresh buying, the rally in the NYMEX March delivery failed to close above the contract's 200-day moving average at $74.18. Overnight trading got as high as $74.30, but prices fell off near the opening bell for the Wednesday floor session.

Oil is still weak from a fundamental and technical perspective. NYMEX average daily volume increased by 37,000 contracts this week as open interest fell 2.6 percent to an average 1.34 million contracts.

 

NYMEX/CME Crude Oil (Mar. '10)

 

MACD remains bearish. The stochastics and RSI indicators have turned up, albeit from intermediate, not bottoming, levels. A close above the March contract's 10-day moving average at $74.40 would clear overhanging resistance and encourage buyers to aim for a key retracement level at $78.74. Bears have set last September's low of $67.46 as their next downside target.