Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=226559
Story Retrieval Date: 2/27/2015 6:41:54 PM CST
Energy Information Administration/Annabelle Ju/MEDILL
This chart shows the decrease in the number of crude oil barrels in millions from 388.1 in November last year to 350.2 in January.
U.S. crude oil inventories decline more sharply than predicted
U.S. petroleum inventories declined faster last week than analysts had been predicting.
Inventories fell 7.7 million barrels to 350.2 million barrels in the week ended Jan. 10, excluding the Strategic Petroleum Reserve inventories, according to the U.S. Energy Information Administration. Still, inventories are in the high average range for this part of the year.
Before the data release, eight analysts surveyed by Bloomberg LP expected the inventories to fall by 1.2 million barrels.
“The biggest reason for the decline was a huge drop in imports,” said Brian Milne, energy editor at Schneider Electric SA, a France-based corporation involved in energy management. “Refineries drew less crude supply during the week last week.”
The U.S. imported 6.8 million barrels of crude oil per day last week, a decrease of 1.2 percent from the same week last year. There was a 1.1 percent decline from the previous week’s 7.9 million barrels imported per day.
Milne said he believes the polar vortex and resulting sub-zero weather that affected most of the U.S. last week also played a role in the sharp inventory decline.
“Analysts were calculating that refineries would use less oil because of the deep freeze,” he said, that caused a sharp drop in imports last week.
Milne predicted that demand for crude oil will continue to rise in 2014 following a fourth quarter when, “demand really started taking off.” But he said he expects crude supplies to rise even faster.
“As the supply overtakes demand, there will be a pressure on prices,” he said. “This is a bearish story, where there is somewhat less volatility, and prices should essentially weaken.”
Michael Lynch, president of Winchester, Mass.-based Strategic Energy & Economic Research Inc., has different expectations.
“Prices will not change more than $5 per barrel,” Lynch said of the short-term outlook for crude oil. Demand typically falls in the spring when refineries focus on maintenance and preparation for a busier summer season.
The freezing weather does not affect crude oil inventories as much as it would natural gas, which is used to heat homes.
Lynch said a key factor to follow is the political turmoil in Libya because the country has the largest oil reserves in Africa and is looking at increasing its crude oil production.
American Petroleum Institute Chief Economist John Felmy agreed.
Referring to regions in Africa and Latin America, Felmy said there are many political challenges to crude oil production and exports. “There are worldwide factors affecting demand and supply,” he said.