Crude Oil, Gasoline Inventories Dip, but Traders Remain Cautious

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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 521.1 million barrels. The commercial crude inventory remains at historically high levels for this time of year, according to the EIA.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories fell by 1 million barrels in the week ending August 12. API also reported gasoline supplies increased by 2.2 million barrels. For the same period, analysts had estimated an increase of around 522,000 barrels in crude inventories, along with a drop of 1.6 million barrels in gasoline supplies and a 740,000-barrel decrease in distillates.

Total gasoline inventories decreased by 2.7 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 about 9.8 million barrels a day for the past four weeks, up by 1.7% compared with the same period a year ago.

Benchmark West Texas Intermediate (WTI) crude prices have jumped about 10% in the past five trading sessions, largely on hopes that the coming OPEC meeting in Algeria will result in a production cut. Those hopes may have been dashed on Tuesday following a statement from Iran that it would not be willing to discuss a cut until the country’s production reaches 4.0 million to 4.2 million barrels a day.

On Monday the EIA reported estimated that September crude production in the seven major onshore shale fields would drop by 85,000 barrels a day compared with August production. The largest declines are expected in the Eagle Ford (down 53,000 barrels a day) and the Bakken (down 26,000). Production in the Permian Basin is expected to rise by 3,000 barrels a day.

Exports of crude oil have risen 9% since restrictions were lifted last December, and averaged just over 500,000 barrels a day for the first five months of 2016. Some 16 countries are currently receiving U.S. oil exports, with the largest amount (54,000 barrels a day) going to Curacao, where a 330,000 barrel-per-day refinery is located. The EIA noted that exports are unlikely to continue to increase unless U.S. production rises, and that depends on significantly wider price differentials between domestic and international (Brent) crude.

The International Energy Agency (IEA) essentially has declared the supply glut ended, but that view is not shared by all observers. The most recent commitment of traders report from the U.S. Commodities Futures Trading Commission (CFTC) showed long positions in WTI crude at a 15-month high of 322,594. Short positions continue to increase as well, ringing in at 220,139 contracts for the period ended August 9. Open interest for the front-month contract rose to a three-year high, according to Reuters.

Before the EIA report, WTI crude for September delivery traded down about 1.3% at around $45.95 a barrel and rose to around $46.35 shortly after the report’s release. WTI crude settled at $46.58 on Tuesday. The 52-week range on September futures is $32.85 to $54.91.

Distillate inventories increased by 1.9 million barrels last week and are now near the upper limit 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, up by 0.3% when compared with the same period last year. Distillate production averaged over 4.9 million barrels a day last week, flat compared with the prior week’s production.

For the past week, crude imports averaged 8.2 million barrels a day, down by about 211,000 barrels a day compared with the previous week. Refineries were running at 93.5% of capacity, with daily input averaging about 16.9 million barrels, about 268,000 barrels a day more than the previous week’s average.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.131, up from $2.127 a week ago and down eight cents compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.670 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 about 0.1%, at $87.82 in a 52-week range of $66.55 to $95.55. Over the past 12 months, Exxon stock has traded up about 11.5% and is down about 14.8% since August 2014, as of Tuesday’s close.

Chevron Corp. (NYSE: CVX) traded up about 0.1%, at $101.69 in a 52-week range of $69.58 to $107.58. As of the most recent close, Chevron shares have added about 22.2% over the past 12 months and trade down about 23.2% since August 2014.

The United States Oil ETF (NYSEMKT: USO) traded down about 0.2%, at $10.90 in a 52-week range of $7.67 to $16.20.

The VanEck Vectors Oil Services ETF (NYSEMKT: OIH) traded down about 1.3% to $28.61, in a 52-week range of $20.46 to $32.78.