Crude Oil Price Pops Higher on Large Inventory Draw

Tuesday evening, the American Petroleum Institute (API) reported that crude inventories fell by 2.4 million barrels in the week ending July 31. For the same period, analysts had estimated a decrease of 1.6 million barrels in crude inventories. The API also reported that gasoline inventories fell by a million barrels and that distillate stockpiles rose by 1.7 million barrels.

Total gasoline inventories increased by 800,000 barrels last week, according to the EIA, and remain in the middle of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged over 9.5 million barrels a day for the past four weeks, up by 5.4% compared with the same period a year ago.

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On Sunday, the Washington Post published an editorial supporting the removal of the U.S. ban on exporting crude oil. The editorial points out the likeliest scenario for U.S. consumers:

Domestic gasoline prices tend to track international, not domestic, oil prices. So the current policy is great for refiners who get to buy their feedstock at a bargain price and sell their product at an international rate. But it’s not much help to domestic producers, who have to accept less money for the crude they bring to market, or to consumers, who don’t get the savings passed on to them.

The issue, here, is whose ox gets gored: the producers’ or the refiners’. Remember that gasoline prices are based on the price of Brent, not the price of West Texas Intermediate (WTI). If now-cheap domestic WTI crude rises nearer to the price for Brent, then domestic refiners lose their cost-advantaged feedstock and profits begin, once again, to flow to producers. Overall, Brent prices are likely to come down while WTI prices rise and gasoline prices also fall.

Before the EIA report, WTI crude for September delivery traded up about 1.2% at around $46.25 a barrel. The WTI price jumped to around $46.60, up about 1.8%, shortly after the report was released. The 52-week range on WTI futures is $45.08 to $93.34.

Distillate inventories increased by 700,000 barrels last week and remain in the middle of the average range for this time of year. Distillate product supplied averaged over 3.7 million barrels a day over the past four weeks, down by 4.1% when compared with the same period last year. Distillate production averaged over 5 million barrels a day last week, about 100,000 barrels a day below the prior week’s production.

For the past week, crude imports averaged 7.2 million barrels a day, down by about 365,000 barrels a day compared with the previous week. Refineries were running at 96.1% of capacity, with daily input of about 17.1 million barrels, about 313,000 barrels a day above the previous week’s average.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.63, down from $2.686 a week ago and from $2.767 a month ago. Last year at this time, a gallon of regular cost $3.49 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 0.3%, at $77.43 in a 52-week range of $76.93 to $100.31. The low was posted earlier in the day. Year to date, Exxon stock traded down about 15.8%, and it is down about 19.5% since early November, as of Tuesday’s close.

Chevron Corp. (NYSE: CVX) traded flat at $85.21, in a 52-week range of $84.68 to $129.53. The low was posted earlier in the morning. As of Tuesday’s close, Chevron shares had dropped about 23.5% year to date and traded down about 28.5% since early November.

The United States Oil ETF (NYSEMKT: USO) traded up about 1%, at $15.37 in a 52-week range of $14.98 to $36.46.

The Market Vectors Oil Services ETF (NYSEMKT: OIH) traded up about 2.2%, at $31.07 in a 52-week range of $30.33 to $55.43.