Like Gold, Oil Rallies Too, But It’s a Different Story Altogether

By Barani Krishnan – While gold and silver are setting one record high and milestone after another on the back of a cratering dollar, oil has been having its own little hurrah — although the government data that gave crude its latest pop on Wednesday barely justified the action.

Oil prices settled up for a fourth straight day, pushing U.S. crude futures’ U.S. West Texas Intermediate benchmark to above $43 a barrel at one point and London’s Brent, the global barometer for crude, to an intraday peak above $46.

WTI settled up 49 cents, or 1.2%, at $42.19 per barrel.

Brent closed the New York session up 74 cents, or 1.7%, at $45.17.

The latest run-up in crude was pinned on data from the Energy Information Administration, which showed a 7.4 million-barrel draw last week, far more than the expected drop of 3 million barrels, that added to the previous week’s 10.6-million draw.

But here’s the catch: None of the numbers in the EIA report added up as to how the latest decline in stockpiles was achieved.

Firstly, there was a surprise rise in gasoline inventories and a shocking build in stockpiles of diesel-led distillates that came in at least five times above expectations.

Gasoline stockpiles rose by 420,000 barrels while distillates inventories grew by 1.6 million.

Imports were higher at 900,00 barrels per day or 6.3 million barrels in total.

Refinery inputs rose, but by just 42,000 barrels daily or 294,000 barrels in all.

Exports fell by 400,000 barrels per day, adding another 2.8 million notional barrels to the mix.

Cushing inventories also rose, by 600,000 barrels. Stockpiles at the Strategic Petroleum Reserve, meanwhile, saw no change.

The only real bullish number, if there was one, was the estimated drop of 100,000 barrels daily in production, which still allowed a deduction of just about 700,000 barrels in total.

Oil stored at the Cushing, Oklahoma, hub rose by 532,000 barrels, compared to expectations for an increase of 607,000 barrels.

“At a glance, the crude draw of above 7 million barrels that the EIA reported hardly makes sense, though you could argue that the declining production and refinery inputs may have been higher than cited,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. “I guess this is the new normal with the EIA, which is going down the same path these days as the API.”

The API. or the American Petroleum Institute, has often led the market astray with inventory numbers that do not add up.

On Tuesday, ahead of the EIA’s data set, API reported a draw of 8.6 million barrels for the week ending August 1, after a 6.8 million barrel draw the previous week.