Crude Oil Price Mostly Steady as Exports Offset Inventory Declines

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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 decreased by 6.5 million barrels last week, maintaining a total U.S. commercial crude inventory of 436.5 million barrels. The commercial crude inventory remained in the middle of the average range for this time of year.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories fell by about 5.2 million barrels in the week ending December 15. API also reported gasoline supplies rose by 2.0 million barrels and distillate inventories decreased by 2.9 million barrels. For the same period, analysts had consensus estimates for a decrease of 3.8 million barrels in crude inventories, a rise of about 1.9 million barrels in gasoline and a decrease of 870,000 barrels in distillate stockpiles.

Total gasoline inventories increased by 1.2 million barrels last week, according to the EIA, and moved near the upper limit of the five-year average range. U.S. refineries produced about 10.1 million barrels of gasoline a day last week, roughly flat compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged over 9 million barrels a day for the past four weeks, up about 0.4% compared with the same period a year ago.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for February delivery traded up about 0.1% at around $57.66 a barrel, and it moved down to around $57.54 after the report’s release before returning to around $57.66 minutes later. WTI settled at $57.56 on Tuesday and opened at $57.66 Wednesday morning. The 52-week range on February futures is $43.76 to $58.99.

Last week’s shutdown of the Forties Pipeline that transports nearly half a million barrels a day of North Sea crude onshore put a bit of air under Brent futures temporarily, but if you look at the export numbers in this week’s EIA report (see below), it’s pretty clear that the shutdown’s effect has mostly been mitigated.

The big thing to watch over the next few weeks is futures and options contracts, especially those held by hedge funds and other speculators. In the week ending last Tuesday, speculators were net long Brent futures by 544 million barrels. On all five of the major petroleum futures contracts, fund managers hold more than 8 barrels long for every barrel short.

At some point — and probably sooner rather than later — the hedgies will want to take their profits. The outage on the Forties Pipeline has only delayed that move.

Week over week, U.S. crude oil exports rose by 772,000 barrels a day last week and U.S. production rose by 9,000 barrels a day to 9.79 million. Exports averaged 1.86 million barrels a day last week and have a cumulative daily average for the year of 964,000 barrels a day, a 102% increase over the year-ago export total.

Distillate inventories increased by 800,000 barrels last week and remained in the lower half of the average range for this time of year. Distillate product supplied averaged 4.0 million barrels a day for the past four weeks, down by 1.2% compared with the same period last year. Distillate production averaged 5.2 million barrels a day last week, roughly flat compared to the prior week’s production.

For the past week, crude imports averaged over 7.8 million barrels a day, up by 471,000 barrels a day compared with the previous week. Refineries were running at 94.1% of capacity, with daily input averaging about 17.1 million barrels a day, about 111,000 more than the previous week’s average. Exports of refined products rose by 1.15 million barrels a day last week to 5.7 million.

Rising exports of both crude oil and refined products more than offset the decline in U.S. stockpiles, even though production growth was modest. One way of looking at the situation is that crude stocks are being drained to boost exports (and refiners’ revenues). Another way is that even if stocks are being drawn down to boost exports, inventory levels are falling and that’s a good thing for producers and ultimately for consumers because it will boost investment in more production.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.423, down 3.1 cents from $2.454 a week ago and down nearly 12 cents per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.253 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 0.1%, at $82.54 in a 52-week range of $76.05 to $91.34. Over the past 12 months, Exxon stock has traded down about 9.1%.

Chevron Corp. (NYSE: CVX) traded down about 0.1%, at $119.68 in a 52-week range of $102.55 to $122.30. As of last night’s close, Chevron shares are trading up about 1.7% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded up about 0.1%, at $11.52 in a 52-week range of $8.65 to $12.00.

The VanEck Vectors Oil Services ETF (NYSEARCA: OIH) traded up about 1% to $24.65, in a 52-week range of $21.70 to $35.20.