Crude Oil Price Jumps on Lower Inventory, but Keep an Eye on Futures

Tuesday evening, the American Petroleum Institute (API) reported that crude inventories fell by 3.7 million barrels in the week ending September 11. For the same period, analysts surveyed by Platts had estimated a decrease of 700,000 barrels in crude inventories.

Total gasoline inventories increased by 1.4 million barrels last week, according to the EIA, and remain in the upper half of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged about 9.2 million barrels a day for the past four weeks, up by 3% compared with the same period a year ago.

U.S. refineries have begun the transition to winter-grade fuel and we should see refinery throughput slow to below 90% of capacity in the next week or two before picking up again. There is little sign that crude oil prices will post any sort of sustainable gain to more than $50 a barrel.

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In the futures market last week, managed money accounts (which includes hedge funds) cut short positions to their lowest level in more than two months. We could see one possible impact of that when it comes time for shorts to roll their bets next month: lower levels of short positions means less short covering means that the bump in the price of crude could be smaller than last month and just as evanescent.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for November delivery traded up about 0.4% at around $46.50 a barrel. The WTI price rose to around $46.75 immediately following the report’s release, up about 0.9% on the day. The 52-week range on WTI futures is $38.51 to $89.41.

Distillate inventories decreased by 2.1 million barrels last week and remain in the middle of the average range for this time of year. Distillate product supplied averaged 3.8 million barrels a day over the past four weeks, up by 1.3% when compared with the same period last year. Distillate production averaged 5.1 million barrels a day last week, about flat compared with the prior week’s production.

For the past week, crude imports averaged 7.2 million barrels a day, down by 13,000 barrels a day compared with the previous week. Refineries were running at 90.9% of capacity, with daily input of over 16.3 million barrels, about 310,000 barrels a day below the previous week’s average.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.283, down from $2.308 a week ago and from $2.603 a month ago. Last year at this time, a gallon of regular cost $3.34 on average in the United States.

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Here is a look at how share prices for two blue-chip stocks and two exchange traded funds reacted to this latest report.

Exxon Mobil Corp. (NYSE: XOM) traded up about 0.4%, at $73.01 in a 52-week range of $66.55 to $97.20. Year to date, Exxon stock traded down about 21% and is down about 24.5% since early November, as of Tuesday’s close.

Chevron Corp. (NYSE: CVX) traded down about 0.1%, at $77.18 in a 52-week range of $69.58 to $123.07. As of Tuesday’s close, Chevron shares have dropped about 31% year to date and trade down nearly 36% since early November.

The United States Oil ETF (NYSEMKT: USO) traded up about 2.1%, at $15.22 in a 52-week range of $12.37 to $35.62.

The Market Vectors Oil Services ETF (NYSEMKT: OIH) traded up fractionally to $29.07, in a 52-week range of $26.00 to $50.85.