DOE Oil Inventory Trumped By Lower Refining Capacity (OIH, USO, VLO)

Jon C. Ogg

We are continuing to see a mixed picture in oil and byproduct inventory levels in the United States.  Some is seasonal, and some may be due to outside demand issues.  This morning’s data from the Department of Energy has a potential impact on the key ETFs of Oil Services HOLDRs (NYSE: OIH) and the United States Oil (NYSE: USO); and are watching Valero Energy Corp. (NYSE: VLO) as a pure-paly for the refining angle.

The DOE reported that crude oil stocks rose by 1.95 million barrels to 368.15 million barrels; Dow Jones had estimates of 800,000 gained and we were looking for up to 1 million barrels.  Gasoline supplies stored fell by -2.689 million barrels to 212.253 million barrels, far more than the -400,000 expected by Dow Jones and worse than our expected level of approximately flat.  Distillates posted the biggest decline of the lot at -3.568 million barrels to 164.874 million barrels.  Dow Jones was looking for roughly a drop of 1 million barrels.

The Valero angle comes from the refineries.  This capacity ran lower again at 81.8% versus 83.7% a week ago.  We were hoping for something to the tune of 83%, but Dow Jones listed the targets as 83.9%.

Oil Services HOLDRs (NYSE: OIH) is up 0.14% at $121.33; United States Oil (NYSE: USO) is up 1% at $36.63, and Valero Energy Corp. (NYSE: VLO) is up 1.3% at $18.23 this morning. On last look, NYMEX Crude was up $0.82 at $84.72 per barrel.