U.S. crude inventories probably rose from a 82-year high as domestic output remained near the most in two decades and demand fell, a Bloomberg survey showed.
Stockpiles grew by 2 million barrels, or 0.5 percent, to 397.3 million, the most since 1931, according to the median of 11 analyst estimates before an Energy Information Administration report tomorrow. Ten respondents forecast an increase and one no change in the inventories.
U.S. oil production, which climbed to the highest level since 1992 in April, has exceeded 7 million barrels a day since early February, according to the EIA, the Energy Department’s statistical arm. Gasoline demand slumped 3.8 percent to 8.42 million barrels a day in the week ended April 26 and imports rose 8 percent.
“Domestic production continues its relentless rise,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion, said in a telephone interview. “Driving activity remains pretty slack. You are just going to have a lot of crude oil.”
West Texas Intermediate crude for June delivery extended gains yesterday after rising 1.7 percent to $95.61 on May 3, when the Labor Department said the U.S. unemployment rate fell to a four-year low. The contract was down 75 cents, or 0.8 percent, at $95.41 at 10:33 a.m. on the New York Mercantile Exchange.
U.S. oil production was 7.31 million barrels a day in the week ended April 26, down from a 21-year high of 7.33 million the previous week. Output levels were 19 percent more than a year ago.
“You are going to see increases in domestic production,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “The long-term trend on domestic production expectations is intact.”
Oil stockpiles jumped 6.7 million barrels a day to 395.3 million, the most since 1931. The EIA compiled inventories monthly beginning in 1920 and weekly starting in 1982.
A combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in states including North Dakota, Oklahoma and Texas. Crude output in North Dakota surged to 779,000 barrels a day in February, up 39 percent from a year earlier.
Rising oil production helped the U.S. meet 84 percent of its energy needs last year, the most since 1991, according to the EIA. The measure of self-sufficiency increased to 88 percent in December, the highest level since February 1987.
“U.S. production is changing the energy world as we know it,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Supply is outpacing demand.”
U.S. gasoline consumption was 3.2 percent lower than a year earlier in the week ended April 26. Total petroleum demand dropped 3.6 percent to 17.9 million barrels a day, the lowest level since March 15.
The gains in oil inventories came mostly from rising imports, Finlon said.
Imports jumped 602,000 a day, or 8 percent, to 8.17 million barrels, the most since Jan. 4. In the first 17 weeks of 2013, imports have averaged 7.77 million barrels a day, down 12 percent from a year earlier.
Imports from Kuwait rose 411,000 barrels a day and Nigeria imports gained 351,000 barrels. Shipments from Canada declined 359,000 barrels a day.
“The flow that we saw, the sharp increase from Kuwait, is likely to continue,” Finlon said. The drop in Canada shipments “was temporary in nature. It will recover.”
The Bloomberg survey also showed that U.S. refineries operated at a rate of 84.9 percent last week, up 0.5 percentage point from a week ago. The utilization rate was 86.4 percent a year earlier.
“I am not looking for enough of a pickup in refining activity to offset supply gains,” O’Grady said.
Tesoro Corp. (TSO) said on April 29 that its 58,000-barrel-a-day Salt Lake City refinery is undergoing planned maintenance. Valero Energy Corp. (VLO) on April 27 reported planned maintenance in the 170,000-barrel-a-day McKee refinery in Texas.
The Bloomberg survey also forecast that inventories of distillate fuel, a category that includes heating oil and diesel, rose 500,000 barrels, or 0.4 percent, to 116.3 million. Eight analysts forecast a gain and three a drop.
Gasoline stockpiles probably slipped 450,000 barrels, or 0.2 percent, to 215.5 million, according to the survey. Seven respondents predicted a decrease, two a gain and two no change.
The EIA is scheduled to release the weekly report at 10:30 a.m. tomorrow in Washington.