New York, 2 February 2011

Platts: Crude oil inventories at Cushing, Oklahoma -- home of the delivery point for the New York Mercantile Exchange (NYMEX) oil futures contracts -- climbed 667,000 barrels to an all-time high of 38.334 million barrels the week ending January 28, according to data released Wednesday by the U.S. Energy Information Administration ( EIA).

The steep contango in the front months of the futures curve continued to provide economic incentive to store additional barrels.

Total U.S. crude stocks increased 2.594 million barrels to 343.159 million barrels. This is slightly less than the 3-million-barrel build anticipated by analysts. Low refinery inputs and an influx of imports, which typically occur in January, have allowed U.S. crude inventories to rebuild 10.047 million barrels.

At 343.159 million barrels, U.S. crude inventories were 19.108 million barrels greater than the five-year average and 14.165 million barrels more than year-ago levels.

Inventories in the Midwest declined 434,000 barrels to 99.173 million barrels, although crude inventories at Cushing (part of the Midwest) increased. This suggests that the draw was further north in the region, given that imports fell 70,000 barrels per day (b/d) to 1.23 million b/d. The likeliest scenario: Crude was in a pipeline, north or south of Cushing, and the inventory build lagged due to transit time.

Gulf Coast crude stocks increased 4.934 million barrels to 171.308 million barrels, despite a drop off in imports, which fell 715,000 b/d to 5.27 million b/d. While gross inputs in the Gulf Coast region jumped 236,000 b/d to 7.52 million b/d, crude runs slipped 25,000 b/d to 7.219 million b/d. This allowed refiners to increase output of light-end products.

U.S. product stocks increased 2.945 million barrels to 731.748 million barrels. A 6.154 million-barrel build in gasoline stocks was partially offset by draws in middle distillates, residual fuel oil and propane and propylene.

Product inventory builds were the beneficiary of declining U.S. oil demand, which declined to a two-and-one-half-month low of 18.839 million b/d.

Demand was down for nearly every product except middle distillates. Demand for middle distillates climbed 181,000 b/d to 3.891 million b/d, due in large part to increased heating oil consumption on the back of exceptionally cold temperatures along the Atlantic Coast.

Stocks of heating oil fell 2.809 million barrels to 39.168 million barrels, while ultra-low-sulfur diesel (ULSD) inventories increased 1.442 million barrels to 113.535 million barrels.

By contrast, demand for gasoline decreased 83,000 b/d to 8.549 million b/d on a week-over-week basis. That was the lowest level in nearly a year and the result of severe winter storms across the Great Plains and Atlantic Coast, which tempered motorist and trucking traffic.

Middle distillate inventories, at 164.078 million barrels, were 24.3 million barrels greater than the five-year average and 7.53 million barrels more than year-ago levels.

Gasoline also sported plush inventory cushions against historical averages. At 236.228 million barrels, gasoline inventories were 10.951 million barrels more than the five-year average and 8.107 million barrels greater than year-ago levels.

Ends --

This analysis and commentary is provided by Linda Rafield, Platts senior oil analyst and editor of the weekly Platts Futures and Derivatives Review, a supplement to Platts Oilgram Price Report.

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