Crude Oil Prices Rise Sharply on Big Drop in Crude Inventories

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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 3.6 million barrels last week, maintaining a total U.S. commercial crude inventory of 528.7 million barrels. The commercial crude inventory remains near the upper limit of the average range for this time of year.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories rose by 897,000 barrels in the week ending April 21. API also reported gasoline supplies increased by 4.4 million barrels and distillate inventories decreased by 360,000 barrels. For the same period, an S&P Global Platts survey of analysts had consensus estimates for a decrease of 1.0 million barrels in crude inventories, a decline of 1.1 million barrels in gasoline inventories, and a drop of 1.8 million barrels in distillate stockpiles.

Total gasoline inventories increased by 3.4 million barrels last week, according to the EIA, and remain near the upper limit of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged over 9.2 million barrels a day for the past four weeks, down by 1.8% compared with the same period a year ago.

Platts oil editor Jack Laursen said:

Crude oil futures have come under pressure during the past week, with front-month New York Mercantile Exchange (NYMEX) light sweet crude falling for six consecutive trading sessions, shedding $4.17 (7.81%). A build in U.S. crude oil stocks would likely add to the downside price pressure. But any bullishness derived from a third consecutive draw may be overlooked if barrels are simply being transferred into refined product storage tanks.

U.S. gasoline stocks have tightened considerably since mid-February and are now slightly below levels seen last year. However, any notion that tightness in gasoline inventories may lead to a rally across the oil complex remains dubious considering soft demand indicators and robust refinery throughput.

Regarding imports from the Middle East, Laursen noted:

After taking into account vessels en-route to the United States, “Imports from Saudi Arabia would end the month roughly around 33 million barrels for the month, or around 1.1 million b/d,” the analysts wrote. “This is a slight decline from February and March, which is another indication the OPEC/non-OPEC deal may be starting to impact the U.S., though perhaps not at the rate that some market participants had hoped for or expected.”

The analysts added that a decline in imports from the Middle East — with imports from Kuwait lower — “dovetails with lower import volumes from Canada during the month.”

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for June delivery traded essentially 0.6%  at around $49.30 a barrel and rose to $49.65 shortly after the report’s release. WTI crude settled at $49.56 on Tuesday. The 52-week range on June futures is $44.56 to $57.95.

Distillate inventories rose by 2.7 million barrels last week and remain in the upper half of the average range for this time of year. Distillate product supplied averaged over 4.1 million barrels a day over the past four weeks, up 4.5% compared with the same period last year. Distillate production averaged about 5.1 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 over 8.9 million barrels a day, up by about 1.1 million barrels a day compared with the previous week. Refineries were running at 94.1% of capacity, with daily input averaging 17.3 million barrels a day, about 341,000 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 $2.408, down a fraction of a penny from $2.408 a week ago and up about 12 cents per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.151 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 up about 0.5%, at $82.12 in a 52-week range of $80.30 to $95.55. Over the past 12 months, Exxon stock has traded down about 6.7% and is down about 20.8% since August 2014, as of Tuesday’s close.

Chevron Corp. (NYSE: CVX) traded up about 0.1%, at $106.88 in a 52-week range of $97.53 to $119.00. As of last night’s close, Chevron shares have added about 4.3% over the past 12 months and trade down about 20% since August 2014.

The United States Oil ETF (NYSEMKT: USO) traded up about 0.2%, at $10.39 in a 52-week range of $9.23 to $12.45.

The VanEck Vectors Oil Services ETF (NYSEMKT: OIH) traded up about 1.3% to $29.19, in a 52-week range of $26.10 to $36.35.