EIA Inventory Shakes Up Crude Oil and Natural Gas

Crude oil is trading at 93.68 this morning gaining 7 cents as the US dollar weakened yesterday after a rash of economic data printed under forecast, giving traders hopes that the Federal Reserve would continue its current money printing program unabated. The dollar which had been trading close to 84 tumbled to trade this morning at 83.05, a weak dollar helps make dollar denominated commodities less expensive for foreign investors.

U.S. crude oil supplies increased 3 million barrels (0.76%) for the week ending May 24, according to an Energy Information Administration report released on Thursday a day later than usual due to the US Memorial Day holiday. After dropping 300,000 barrels the previous week, weaker refinery input (down 220,000 barrels per day) and a decline in imports (down 313,000 barrels per day) pushed oil supplies up to a new all-time high of 397.6 million barrels.

While oil inventories headed higher, gasoline supplies fell 1.5 million barrels and remain “in the upper half of the average range,” according to the EIA. Demand remains weak, down a seasonally adjusted 2.4% over the past four weeks. Weaker demand helped push pump prices down to a national average of $3.645 per gallon for May 27. That’s $0.028 per gallon less than the previous week and $0.025 less than May 27, 2012.

Crude oil fell below $93 per barrel in the early session, amid concerns about global economic growth and as traders awaited the latest US crude inventories data. However, prices later recovered to close in positive on upbeat economic data. US crude oil inventories posted a surprise 3mn barrel rise last week, pushing inventories to their highest level since May 1931.

OPEC will begin its production meeting later today. Analysts expect that OPEC will leave its oil output ceiling at 30 million barrels per day, where it has stood since the end of 2011, despite actual output running above this target level. The oil ministers of Iraq, Venezuela and Angola on Thursday indicated support to keep the cartel’s output unchanged.

Natural gas tumbled to trade at the $4.00 price level. Yesterday natural-gas tumbled almost 4% on NYMEX, after a report on US gas stockpiles spurred concerns that weaker fuel demand this summer will send supplies higher. The US Energy Information Administration said domestic inventories of natural gas rose by 88bn cubic feet to 2.141 trillion cubic feet in the week ended May 24. Crude oil is expected to hold close to the $4.00 level, as future demand keeps markets interested in the commodity. Foreign investments in natural gas development continue in the headlines.