Crude Oil Inventories Fall as Gasoline Inventories and Prices Rise

Total gasoline inventories increased by 800,000 barrels last week and have moved into the upper half of the five-year average range. Total motor gasoline supplied (the EIA’s measure of consumption) averaged 9.1 million barrels a day over the past four weeks, up about 2.9% over the same period a year ago.

Distillate inventories rose by 400,000 barrels last week and remain below the lower limit of the average range. Distillate product supplied averaged more than 4 million barrels a day over the past four weeks, up by 2.5% when compared with the same period last year. Distillate production averaged 4.7 million barrels a day last week, about 200,000 barrels below the prior week’s production.

Tuesday evening, the American Petroleum Institute (API) reported that crude inventories fell by 5.7 million barrels in the week ending June 13, together with a decline of 48,000 barrels in gasoline supplies and a rise of 531,000 barrels in distillate supplies. For the same period, analysts estimated a decrease of 1.4 million barrels in crude inventories, a drop of 1.5 million barrels in gasoline inventories and a rise of 600,000 barrels in distillate inventories.

Before the EIA report, West Texas Intermediate (WTI) crude was trading up at around $106.60 a barrel, about 0.2% above Tuesday’s closing price of $106.36. The WTI price rose to $104.47 a barrel shortly after the report was released.

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For the past week, crude imports averaged more than 7.2 million barrels a day, up by 88,000 barrels a day over the previous week. Refineries were running at 87.1% of capacity, with daily input of more than 15.4 million barrels a day, down 150,000 barrels a day compared with the previous week’s average.

The situation in Iraq has been viewed as the main driver for rising crude prices and, ultimately, pump prices for gasoline. That is only part of the story. The bigger part is that gasoline traders have scrambled to buy more gasoline as the threat to supplies increases. Gasoline stockpiles had been running low and the threat to supplies spurred a buying binge. Unlike crude producers, gasoline marketers do not hedge, according to energy economist Philip Verleger. Thus, threats to crude supplies are quickly passed on in higher prices for products on the assumption that crude will now be more costly. That’s where we are today.

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According to AAA, the current national average pump price per gallon of regular gasoline is $3.669, up from $3.644 a week ago and up from $3.646 a month ago. Last year a gallon of regular cost $3.607 on average in the United States.

Here is a look at how share prices at three U.S. producers reacted to this latest EIA report.

Exxon Mobil Corp. (NYSE: XOM) traded flat at $102.42, in a 52-week range of $84.79 to $103.45.

Chevron Corp. (NYSE: CVX) traded up 02%, at $129.13 in a 52-week range of $109.27 to $129.32. The high was set earlier in the morning.

Continental Resources Inc. (NYSE: CLR) trades down about 0.9%, at $150.95 in a 52-week range of $80.44 to $153.56. Continental is the largest producer in the Bakken Shale play.

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