Crude Oil Price Sinks on Huge Inventory Increase

Crude oil for May delivery had risen sharply from a low of around $48 a barrel last week to nearly $54 a barrel on Tuesday. Then the Saudis announced production of 10.3 million barrels a day in March and promised to keep production at around 10 million barrels. That cooled prices down a little, as did the announced agreement with Iran over that country’s nuclear development program. West Texas Intermediate (WTI) crude oil closed at $53.98 on Tuesday.

Total gasoline inventories increased by 800,000 barrels last week and remain well above the upper limit of the five-year average range. Total motor gasoline supplied (the EIA’s measure of consumption) averaged about 9 million barrels a day for the past four weeks, up by 2% compared with the same period a year ago.

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Distillate inventories decreased by 300,000 barrels last week and remain in the lower half of the average range. Distillate product supplied averaged more than 3.9 million barrels a day over the past four weeks, up by 2.7% when compared with the same period last year. Distillate production averaged about 5 million barrels a day last week, around 100,000 barrels a day higher compared with the prior week’s production.

Tuesday evening, the American Petroleum Institute (API) reported that crude inventories rose by a massive 12.2 million barrels, gasoline inventories fell by 2.7 million barrels and distillate inventories rose by 331,000 barrels in the week ending April 3. For the same period, analysts had estimated an increase of 3.4 million barrels in crude inventories, a drop of 1.3 million barrels in gasoline stockpiles and a rise of 900,000 barrels in distillate inventories.

Before the EIA report, WTI crude for May delivery was trading down about 2.4% at around $52.75 a barrel Wednesday morning. The WTI price slipped further to around $52.45 (down about 2.8% for the day) immediately after the report was released. The 52-week range on WTI futures is $44.03 to $98.87.

For the past week, crude imports averaged over 8.2 million barrels a day, up by 869,000 barrels a day compared with the previous week. Refineries were running at 90.1% of capacity, with daily input of more than 15.9 million barrels, about 201,000 barrels a day above the previous week’s average. Refinery utilization continues to rise as refiners meet both domestic and export demand for refined products.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.388, down from $2.407 a week ago and from $2.454 a month ago. Last year a gallon of regular cost $3.586 on average in the United States.

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Here is a look at how share prices for two exchange traded funds reacted to this latest report.

The United States Oil ETF (NYSEMKT: USO) traded down about 2.6%, at $18.58 in a 52-week range of $15.61 to $39.44. The low was set earlier in the day.

The Market Vectors Oil Services ETF (NYSEMKT: OIH) traded down about 0.8%, at $35.22 in a 52-week range of $31.51 to $58.01.