Oil Inventory Hits "Levels Not Seen in 80 Years"; Crude Jumps on News Russia May Cooperate with OPEC

"Levels Not Seen in 80 Years"

The supply glut in oil storage continues as crude. Inventories hit new all-time highs this past week.



The above charts from EIA Weekly Supply Data shows the crude inventory of 494,920,000 (not counting strategic reserves) passed the previous high of 490,912,000 set on April 24, 2015.

Reserves, including the Strategic Petroleum Reserve (SPR), reached 1,190,038 barrels, also a record high.

Comments From EIA Weekly Report

Here are some interesting comments from the Weekly EIA Report.

"At 494.9 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 3.5 million barrels last week, and are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 4.1 million barrels last week but are near the upper limit of the average range for this time of year. Propane/propylene inventories fell 6.2 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 1.0 million barrels last week."

Crude Jumps on News Russia May Cooperate with OPEC

Despite the record inventory surge, crude jumped a bit from extremely oversold levels on news Russia Dangles Prospect of OPEC Cooperation.

Oil futures surged on Wednesday, after Russia said it was discussing the possibility of co-operation with OPEC, fanning hopes that a deal was in the works to reduce oversupply that sent prices the lowest levels in a dozen years last week.

Russia's energy ministry said possible coordination with the Organization of the Petroleum Exporting Countries (OPEC) was discussed at a meeting with Russian oil companies on Wednesday.

"I remain skeptical, at the end of the day, about that happening as the oil producers are looking at the other guy to cut production while maintaining their own levels," Andrew Lipow of Lipow Oil Associates said.

Crude was looking firm before the Russia news on the back of a U.S. Energy Department report showing a surprise spike in demand for refined products like heating oil last week, when a massive blizzard hit the U.S. Northeast.

The U.S. Energy Information Administration said inventories of distillates, fell more than 4 million barrels, trumping expectations for a rise of about 2 million.

Economists Surprised Again

Despite the small drawdown in fuel oil please recall the report stated "Distillate fuel inventories are near the upper limit of the average range for this time of year."

Economists can be surprised by anything including the possibility blizzards and cold weather may increase the demand for fuel oil in the Northeast!

Mike "Mish" Shedlock