The US Energy Information Administration reported that US inventories of crude oil rose by 700,000 barrels last week, a sharp increase especially given analysts’ estimates that inventories would drop by 1 million barrels. Distillate inventories are substantially higher than average as well, having added more than 2 million barrels last week alone.
Most diesel fuel in the US is used in the trucking and railroad industries. Lack of consumer demand is reducing the amount of goods being transported, and that leads to a drop in demand for diesel fuel. Like so much else, the overall economy is putting more pressure on refiner revenues and earnings.
As we noted in our piece including Valero Energy Corp. (NYSE: VLO) in the energy stocks which could double by the end of 2010, it seems that rapidly rising prices and rapidly plummeting prices create additional issues for refiners. Unfortunately, it isn’t as simple as “oil is up, so all aspects of the energy sector should rise too.”
So far this morning, Valero and Marathon are trading up a bit, while Tesoro is off nearly 2%. NYMEX crude futures are up about 3% today, boosting most oil companies and the overall market.
Paul Ausick
March 12, 2009
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