Strong US inventories temper record oil prices

According to the US Energy Information Administration on Wednesday, crude oil inventories in the US were up by 2.8 million barrels in the week ending August 5, based largely on increased imports.

The US imported 11 million barrels of oil per day on the week, up by 101,000 barrels per day from the previous week, as oil refiners attempted to keep up with summer demand. It had been predicted that the crude oil stockpile would fall by 600,000 barrels on the week.

The surprise increase took prices for September delivery West Texas Intermediate crude on the New York Mercantile Exchange from a new high of $64.30 per barrel before the inventories information was released, down to $63.20 per barrel at midday, only a 13 cent increase over Tuesday’s close.

Later in the day, WTI broke through the $65 level before settling to a close of $64.90, a rise of $1.83 over Tuesday’s close. Meanwhile in London, Brent crude on the International Petroleum Exchange closed up $2.01 to $63.99 per barrel, also a new high.

The weekly inventories report also showed a surprise increase in distillates stockpiles. Predictions had been for an increase of 1.9 million barrels on the week; inventories actually grew by 2.6 million barrels, almost three-quarters of a million barrels more than expected.

On this news, Nymex heating oil September contracts fell from a record high of $1.8175 per gallon to $1.7970 per gallon after the report was released.

Concerns about terrorist threats in Saudi Arabia, the reactivation of Iran’s nuclear program, and shortages in refining capacity in the US all contributed the day’s gains in oil prices.