Gasoline and Crude Oil Prices Falling as Refiners Increase Output

Total gasoline inventories increased by 600,000 barrels last week and remain in the middle of the five-year average range. Total motor gasoline supplied (the EIA’s measure of consumption) averaged more than 9 million barrels a day for the past four weeks, down by about 0.4% over the same period a year ago.

Distillate inventories rose by 200,000 barrels last week and remain near the lower limit of the average range. Distillate product supplied averaged 3.8 million barrels a day over the past four weeks, down by 6.2% when compared with the same period last year. Distillate production averaged 5.1 million barrels a day last week, about 100,000 barrels above the prior week’s production.

Tuesday evening, the American Petroleum Institute (API) reported that crude inventories fell by 1.7 million barrels in the week ending July 4, together with a rise of 112,000 barrels in gasoline supplies and a decrease of 522,000 barrels in distillate supplies. For the same period, analysts estimated a decrease of 3 million barrels in crude inventories, a decline of 1 million barrels in gasoline inventories and a rise of 1.2 million barrels in distillate inventories.

Before the EIA report, West Texas Intermediate (WTI) crude was trading down at around $102.604 a barrel, about 0.9% below Tuesday’s closing price of $103.40. The WTI price fell further to around $102.40 a barrel shortly after the report was released.

For the past week, crude imports averaged more than 7.3 million barrels a day, up by 20,000 barrels a day over the previous week. Refineries were running at 91.6% of capacity, with daily input of more than 16.3 million barrels a day, up 34,000 barrels a day compared with the previous week’s average.

Falling inventories and falling prices seldom occur in the oil markets. Refiners are running at nearly full capacity as gasoline prices decline and, as a result, are paying less for crude. Producers are slowing down, but they cannot slow down enough to push the prices back up. Refiners and gasoline prices are dictating the terms now.

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According to AAA, the current national average pump price per gallon of regular gasoline is $3.645, down from $3.67 a week ago and down from $3.653 a month ago. Last year a gallon of regular cost $3.483 on average in the U.S.

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

Exxon Mobil Corp. (NYSE: XOM) traded up at $103.59, in a 52-week range of $84.79 to $104.61.

Chevron Corp. (NYSE: CVX) also traded up at $130.91, in a 52-week range of $109.27 to $133.57.

Continental Resources Inc. (NYSE: CLR) trades up about 0.3%, at $155.58 in a 52-week range of $89.72 to $159.24. Continental is the largest producer in the Bakken Shale play.

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