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Inventory Data Boost Energy

Chuck Marvin

Energy futures took a bounce on Wednesday after the Energy Information Administration released surprisingly bullish crude oil inventory figures.

The near-term contract for crude oil closed the trading session $1.13 higher at $61.82 a barrel on the New York Mercantile Exchange. Gasoline was up 5 cents at $1.90 a gallon, and heating oil climbed 2 cents to $1.77 a gallon.

Natural gas fell 10 cents to $7.37 per million British thermal units. New inventory figures for natural gas will be released Thursday.

Bank of America analysts were expecting crude oil inventories to increase by 1.8 million barrels during the week ended March 2, but stocks actually shrank by 4.8 million barrels. Analysts were expecting a 400,000-barrel decrease in gasoline inventories, but they in fact fell by 3.8 million barrels.

The distillate draw of 1.3 million barrels was also greater than projected.

Energy futures, which were already trading higher before the EIA figures were released, quickly spiked on the news.

"The crude inventory numbers surprised everybody," said Addison Armstrong, director of market research at TFS Research in Stamford, Conn. "Nobody expected a draw close to that size."

Energy prices have now erased most of their losses since crude oil fell last week below $60 from a high near $62. Wednesday was the first day in more than a week that energy commodities closed higher while equity markets finished lower.

Crude prices were also rising because of reduced output from the Nigerian delta due to a pipeline leak and a new blast of cold weather along the East Coast of the U.S.

Inventories of gasoline, which were 5.7% above the five-year average at the beginning of February, are only 0.7% above average now.

"The numbers show that U.S. demand for gasoline is increasing at a time when no imports are coming from Europe and lots of maintenance is occurring at refineries," Addison said. "Our surplus of gasoline has basically disappeared."

If crude oil closes above $62 a barrel anytime this week, it will likely make a run toward $63, according to Addison. He also believes that tight gasoline supplies will encourage the price of reformulated gasoline to climb toward $1.95 a gallon.

Energy stocks were mostly higher. The iPath Goldman Sachs Crude Oil (OIL Quote) ETF was up 2% at $37.68.

Oil giant Exxon Mobil (XOM Quote) added nearly 1% to $71.64 after saying it plans to start more than 20 new projects around the world in the next three years.

El Paso (EP Quote) was upgraded by Calyon Securities from neutral to buy, and its stock finished the day 12 cents higher at $13.98.

Calyon also upgraded Williams Companies (WMB Quote) from add to buy, and its shares moved 3.7% higher at $27.18.

Natural gas distributor Oneok(OKE Quote) was upgraded by Wachovia from market-perform to outperform. Its stock rose 3.8% to $42.41.