The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories decreased by 2.5 million barrels last week, maintaining a total U.S. commercial crude inventory of 521.8 million barrels. The commercial crude inventory remains at historically high levels for this time of year, according to the EIA.

Wednesday morning, the International Energy Agency (IEA) issued its monthly Oil Market Report. The agency said that “little has changed [month over month] with the market showing an extraordinary transformation from a major surplus in 1Q16 to near-balance in 2Q16.” The IEA noted that commercial inventories rose by 13.5 million barrels in May to close the month at a record global total of 3.07 billion barrels.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories rose by 2.2 million barrels in the week ending July 8. API also reported gasoline supplies increased by 1.5 million barrels and distillate supplies added 2.6 million barrels. For the same period, analysts had estimated a decrease of around 2.95 million barrels in crude inventories along with a decline of 432,000 barrels in gasoline supplies and a 256,000-barrel increase in distillates.

Total gasoline inventories increased by 1.2 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 9.7 million barrels a day for the past four weeks, up by 1.6% compared with the same period a year ago.

The combined effect of the API inventory report and the IEA monthly report was to push crude prices down. The EIA-reported drop in crude supplies is more than outweighed by the addition to the gasoline stockpile.

Refiners were taking some lumps Wednesday morning as well before the EIA report and are likely to get hit harder on the increased supply of motor gasoline. The IEA’s report also contained cautionary words about refining as the market rebalances:

In mid-summer 2016, although market balance is upon us, the existence of very high oil stocks is a threat to the recent stability of oil prices: in 1Q16 refinery runs growth was 60% higher than  refined product demand growth. Despite the regular upwards revisions to demand that we have seen in recent Reports there are signs that momentum is easing; and, although stocks are close to topping out, they are at such elevated levels, especially for products for which demand growth is slackening, that they remain a major dampener on oil prices. With global refinery runs expected to fall by 0.8 mb/d in 2Q16 before surging by 2.4 mb/d in 3Q16, we may well see crude oil stocks fall back but there is a risk that, unless demand turns out to be stronger than we currently anticipate, products stocks could rise still further and threaten the whole price structure.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for August delivery traded down about 1.2% at around $47.25 a barrel and dropped to around $45.68 shortly after the report’s release. WTI crude settled at $46.80 on Tuesday. The 52-week range on August futures is $32.22 to $56.51.
Distillate inventories increased by 4.1 million barrels last week and also remain well above the upper limit of the average range for this time of year. Distillate product supplied averaged about 3.8 million barrels a day over the past four weeks, up by 1.8% when compared with the same period last year. Distillate production averaged about 5 million barrels a day last week, roughly flat compared with the prior week.

For the past week, crude imports averaged over 7.8 million barrels a day, down by about 522,000 barrels a day compared with the previous week. Refineries were running at 92.3% of capacity, with daily input averaging over 16.5 million barrels, about 143,000 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 $2.217, down from $2.264 a week ago and down about 16 cents compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.77 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 down 0.7%, at $94.27 in a 52-week range of $66.55 to $94.95. The high was posted Tuesday. Over the past 12 months, Exxon stock has traded up about 15.2% and is down about 8% since August 2014, as of Tuesday’s close.

Chevron Corp. (NYSE: CVX) traded down about 0.5%, at $106.19 in a 52-week range of $69.58 to $107.30, and the high was also posted Tuesday. As of the previous close, Chevron shares had added about 12.9% over the past 12 months and traded down about 20% since August 2014.

The United States Oil ETF (NYSEMKT: USO) traded down about 4%, at $10.74 in a 52-week range of $7.67 to $17.70.

The Market Vectors Oil Services ETF (NYSEMKT: OIH) traded down about 1.8% at $29.51, in a 52-week range of $20.46 to $33.63.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.