This EIA data set for the week to 24 August is notable for two things. First, crude inventories built sharply, contrary to expectations and second, they probably just missed any real impact from Hurricane Isaac.
US crude inventory jumped 3.8mmbbl as compared to the 1.8mmbbl draw the market had been expecting. The sharp increase had been presaged in the API data released on Tuesday night, which may have lessened the market impact of the numbers themselves. In any case, the clear explanation for the inventory surprise was the 1.3mmb/d increase in crude imports. That was by far the largest weekly increase this year and the second largest absolute WoW change in either direction this year.
Hurricane Isaac has now cut oil production in the Gulf of Mexico by 1.3mmb/d (93%) as of 28 August; according to Bloomberg, It has also completely shut in 1.1mmb/d of refining capacity with reduced run rates at other refineries. That has resulted in a 40% plus spike in refining margins on the Gulf and East Coasts. However, although Hurricane Isaac has made a lot of news, it was low intensity, as hurricanes go, so we expect a swift resumption of production and refining operations on the Gulf Coast.
Near term, global oil prices may prove to be more sensitive to the geopolitical reaction to the IAEA Board Report on Iran’s nuclear activities ahead of the IAEA Board meeting on 10 September. Release is imminent, we believe, and is likely to confirm continued progress by Iran, particularly on further centrifuge installations at the Fordow site, which is a particularly sensitive issue for Israel.