Crude Oil Price Skips Higher on Inventory Drawdown

Energy

Published: June 15, 2016 11:10 am

Last Updated: January 13, 2020 6:46 am

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories decreased by 900,000 barrels last week, maintaining a total U.S. commercial crude inventory of 531.5 million barrels. The commercial crude inventory remains at historically high levels for this time of year, according to the EIA.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories rose by 1.5 million barrels in the week ending June 10. API also reported gasoline supplies rose by 2.3 million barrels and distillate stockpiles rose by 3.7 million barrels. For the same period, analysts had estimated a decrease of around 1.4 million barrels in crude inventories along with a decline of 1.2 million barrels in gasoline supplies and a 750,000-barrel decline in distillates.

Total gasoline inventories decreased by 2.6 million barrels last week, according to the EIA, and remain well above the upper limit of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged over 9.6 million barrels a day for the past four weeks, up by 2.9% compared with the same period a year ago.

Since touching a high of $52.28 last Thursday, benchmark West Texas Intermediate (WTI) has retreated by about 7% to close at $48.49 on Tuesday. Both OPEC and the International Energy Agency (IEA) said earlier this week that the oil market is returning to balance, and combined with two straight weeks of increasing rig counts in the oil patch, the effect on traders has been to cool enthusiasm for higher prices. The uncertainty surrounding the United Kingdom’s coming vote on whether to remain in the European Union is also pushing bond prices up and the dollar lower. The dollar strengthened a little earlier Wednesday as markets wait to hear the Federal Open Market Committee (FOMC) decision on interest rates.

A report Monday in The Wall Street Journal noted that Venezuelan crude oil production fell to a 10-year low in May to 2.37 million barrels a day. Added to continued supply disruption in Nigeria and Libya, global supply could come under some pressure as demand remains strong.

Before the EIA report, WTI crude for July delivery traded down about 2.4% at around $47.90 a barrel and jumped back to around $48.25 shortly after the report’s release. WTI crude settled at $49.06 on Tuesday. The 52-week range on July futures is $32.22 to $63.95.

Distillate inventories increased by 800,000 barrels last week and also remain well above the upper limit of the average range for this time of year. Distillate product supplied averaged over 3.8 million barrels a day over the past four weeks, down by 2.6% when compared with the same period last year. Distillate production averaged about 4 million barrels a day last week, down about 800,000 compared with the prior week.

For the past week, crude imports averaged over 7.6 million barrels a day, down by about 83,000 barrels a day compared with the previous week. Refineries were running at 90.2% of capacity, with daily input averaging over 16.3 million barrels, about 100,000 barrels a day less than the previous week’s average.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.366, up from $2.356 a week ago and up more than 14 cents compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.804 on average in the United States.

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 0.3%, at $90.67 in a 52-week range of $66.55 to $91.43. Over the past 12 months, Exxon stock has traded up about 8.4% and is down about 12.4% since August 2014, as of Tuesday’s close.

Chevron Corp. (NYSE: CVX) traded down about 0.1%, at $101.21 in a 52-week range of $69.58 to $104.26. As of Tuesday’s close, Chevron shares have added about 2% over the past 12 months and trade down about 24.2% since August 2014.

The United States Oil ETF (NYSEMKT: USO) traded down about 0.3%, at $11.70 in a 52-week range of $7.67 to $20.66.

The Market Vectors Oil Services ETF (NYSEMKT: OIH) traded up about 0.9% at $29.41, in a 52-week range of $20.46 to $37.06.

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