February 20, 2014 / 5:14 PM / 4 years ago

UPDATE 1-U.S. crude stocks build, Cushing falls as glut eases-EIA

By Elizabeth Dilts

NEW YORK, Feb 20 (Reuters) - U.S. crude oil stocks rose almost 1 million barrels to 362 million barrels and fell 1.73 million barrels at the Cushing storage hub, indicating ample supply flowing to the Gulf Coast, Energy Information Administration data showed on Thursday.

Analysts polled by Reuters had expected a nationwide build of 2 million barrels, and U.S. benchmark oil futures rose about 20 cents in the immediate minutes after the data was issued. By 12:05 a.m. EST (1705 GMT), they were 0.11 percent lower at $103.20 a barrel.

Crude stocks amounted to 35.87 million barrels at Cushing and rose on the Gulf Coast by 2.5 million barrels to 176 million barrels, a sign that, thanks to new pipelines, an increasing amount of oil is being moved from storage to the huge refining hub in states such as Texas and Louisiana.

TransCanada Corp’s 700,000 barrel per day (bpd) Gulf Coast pipeline, running from Cushing to Texas, is ramping up after it began service in late January. The pipeline flowed at initial rates of 300,000 bpd.

Market players have debated whether a glut of oil at Cushing, where stocks hit record highs last year, would just be moved to the Gulf Coast as pipelines become operational and in the absence of any possibilities of exporting excess oil.

That would be bearish for U.S. benchmark oil prices in the long term. However, Richard Hastings, macro strategist at Global Hunter Securities in California, said the export of refined products is supportive of prices.

“I‘m not concerned about the build in PADD 3. The theoretical model that U.S. crude oil prices will be determined by a Gulf Coast oil bloat is not logical. ... If you look at Gulf Coast inventories as a percentage of U.S. stocks, it’s going back to 51-52 percent of commercial crude,” he said.

“The key number is the (refined product) export number. And at 3.66 million barrels a day, that’s nice. It has to continue to go up and if it doesn‘t, we have reason to think there’s too much oil. But as of right now, that’s not the case.”

The rates at which refineries ran their operations slipped 0.3 percentage point nationwide to 86.8 percent of capacity, as plants undergo maintenance work that traditionally occurs at this time of the year.

On the Gulf Coast, the rate fell 0.6 percentage point to 87.4 percent while at 94.3 percent, refiners in the Midwest were running at unseasonably high rates. On the East Coast, refiners were running at 75.1 percent.

The EIA data showed stocks of distillates fell just 340,000 barrels, far less than the 2 million barrel draw expected by analysts. Heating oil futures eased slightly after the data and by 12:05 a.m. EST (1705 GMT) they were 0.34 percent higher at $3.1576 a gallon.

Distillate stocks rose slightly by 134,000 barrels to 27.5 million barrels on the East Coast after they hit their lowest since April 2013. Parts of the country have been hit by a particularly harsh winter since the start of the year, during which demand for fuels that can be used for heating rises.

“The distillates draw didn’t match expectations. That implies that imports may be coming from Europe - a couple of cargoes are booked,” said Bob Yawger, director of commodities futures at Mizuho Securities in New York.

“Last year, we didn’t even bottom out on distillates until April 5. If we extrapolate from that information from last year to this year, that implies we won’t even be at the bottom of the barrel for another six weeks,” Yawger said.

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