Crude Oil Price Bounces Down, Then Back, on Mixed Inventory Report

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The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning, showing that U.S. commercial crude inventories dropped by 6.5 million barrels last week, maintaining a total U.S. commercial crude inventory of 475.4 million barrels. The commercial crude inventory remained in the upper half of the average range for this time of year.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories dropped by 7.9 million barrels in the week ending August 4. API also reported gasoline supplies added 1.5 million barrels and distillate inventories fell by 157,000 barrels. For the same period, a survey of analysts had consensus estimates for a decrease of 2.7 million barrels in crude inventories, a decrease of 1.4 million barrels in gasoline inventories and a drop of 131,000 barrels in distillate stockpiles.

Total gasoline inventories increased by 3.4 million barrels last week, according to the EIA, and remain in the upper half of the five-year average range. U.S. refineries produced 10.3 million barrels of gasoline a day last week, roughly equal compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged about 9.8 million barrels a day for the past four weeks, down by 0.1% compared with the same period a year ago.

The outcome of the recent two-day meeting of OPEC’s technical meeting did not do much to lift the price of crude. Four producing countries — United Arab Emirates, Iraq, Kazakhstan and Malaysia — agreed to maintain production in line with their previously agreed levels. That could stem the production hikes that have made it difficult for the cartel to force prices higher.

A more direct impact on prices is likely following an announced cut of Saudi exports to Asia. This represents a serious commitment by the Saudis to make good on their promise to do whatever it takes to raise prices. Asia is one of the kingdom’s most important markets, and that it is willing to risk its market share in the region indicates just how much Saudi Arabia wants to boost prices.

There are two primary reasons for that. First, the country needs to boost its revenues. Second, the planned public offering of stock in Saudi Aramco will attract more cash if prices are higher.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for September delivery traded up about 0.7% at around $49.50 a barrel and was essentially flat shortly after the report’s release. After a dip to near $49, WTI prices bounced back to around $49.40 a barrel. WTI settled at $49.17 on Tuesday and opened at $49.00 Wednesday morning. The 52-week range on September futures is $42.29 to $58.36.

Distillate inventories decreased by 1.7 million barrels last week and remain in the upper half of the average range for this time of year. Distillate product supplied averaged over 4.3 million barrels a day over the past four weeks, up by 13.3% compared with the same period last year. Distillate production averaged 5.3 million barrels a day last week, up about 100,000 barrels a day compared with the prior week’s production.

For the past week, crude imports averaged about 7.8 million barrels a day, down by 491,000 barrels a day compared with the previous week. Refineries were running at 96.3% of capacity, with daily input averaging 17.6 million barrels a day, about 166,000 barrels a day more than the previous week’s average. Analysts were looking for refinery usage of 95.1% for the week.

Crude oil exports rose to 707,000 barrels a day last week, up by 5,000 barrels over the prior week and 30,000 barrels more than at the same time last year. The cumulative daily average export total last week was 764,000 barrels a day, up from 461,000 barrels a day in the same week a year ago, an increase of 69%.

Refining runs of 17.6 million less imports of 7.8 million and domestic production of 9.42 million barrels a day last week continue to imply that stockpiles may not be falling fast enough to push prices higher before the summer driving season ends.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.359, up nearly three cents from $2.330 a week ago and up almost 10 cents per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.124 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 less than 0.1%, at $79.97 in a 52-week range of $78.27 to $93.22. Over the past 12 months, Exxon stock has traded down about 7.9%.

Chevron Corp. (NYSE: CVX) traded up about 0.4%, at $110.84 in a 52-week range of $97.53 to $119.00. As of last night’s close, Chevron shares are up more than 11% over the past 12 months.

The United States Oil ETF (NYSEMKT: USO) traded up about 0.5%, at $10.11 in a 52-week range of $8.65 to $12.00.

The VanEck Vectors Oil Services ETF (NYSEMKT: OIH) traded down about 0.8%, at $23.28 in a 52-week range of $23.14 to $36.35. The low was posted this morning.