Crude Oil Price Dips as Inventory Rises, but Refineries Slow Down

Wednesday evening, the American Petroleum Institute (API) reported that crude inventories rose by 2.1 million barrels in the week ending September 4. The API also reported that gasoline supplies rose by 700,000 barrels and distillate stockpiles rose by 800,000 barrels. For the same period, analysts surveyed by Platts had estimated an increase of 300,000 barrels in crude inventories.

Total gasoline inventories increased by 400,000 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 9.3 million barrels a day for the past four weeks, up by 3.8% compared with the same period a year ago.

The U.S. House of Representatives Energy and Power subcommittee has been lining up votes to lift the 40-year ban on exports of U.S. crude. On Wednesday, 14 Democrats known as the Blue Dogs said they supported lifting the ban on oil exports. What all this means is not terribly clear, although the most likely options are an up or down vote on legislation to lift the ban or adding the export language to other legislation, such as the spending bill or the highway funding bill.

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One more thing to keep an eye on in coming days is short covering in the futures market, especially by the managed money (hedge fund) crowd. In late August, a total of about 163 million barrels from all categories of investors were short, nearly triple the 56 million barrels short in mid-June. Hedge fund short positions have dropped by about 30% since the beginning of August from around 2.9 million barrels to less than 2.1 million, according to John Kemp at Reuters.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for October delivery traded up about 2.5% at around $45.24 a barrel. The WTI price dipped to around $45.05 immediately following the report’s release, still up about 2% on the day. The 52-week range on WTI futures is $37.75 to $90.76.

Distillate inventories increased by a million barrels last week and remain in the middle of the average range for this time of year. Distillate product supplied averaged 3.7 million barrels a day over the past four weeks, down by 1.2% when compared with the same period last year. Distillate production averaged 4.8 million barrels a day last week, down about 100,000 barrels a day compared with the prior week’s production.

For the past week, crude imports averaged 7.5 million barrels a day, down by 396,000 barrels a day compared with the previous week. Refineries were running at 90.9% of capacity, with daily input of about 16.1 million barrels, about 279,000 barrels a day below the previous week’s average.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.369, down from $2.438 a week ago and from $2.591 a month ago. Last year at this time, a gallon of regular cost $3.428 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 0.5%, at $72.33 in a 52-week range of $66.55 to $98.05. Year to date, Exxon stock traded down about 22%, and it is down about 25% since early November as of Tuesday’s close.

Chevron Corp. (NYSE: CVX) traded down fractionally, at $74.91 in a 52-week range of $69.58 to $125.70. As of Wednesday’s close, Chevron shares have dropped about 33% year to date and trade down more than 37% since early November.

The United States Oil ETF (NYSEMKT: USO) traded up about 1.6%, at $14.74 in a 52-week range of $12.37 to $35.76.

The Market Vectors Oil Services ETF (NYSEMKT: OIH) traded down about 0.9%, at $29.28 in a 52-week range of $26.00 to $53.23.