Crude Oil Price Dips as Petroleum Inventories Balance

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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 4.9 million barrels last week, maintaining a total U.S. commercial crude inventory of 419.5 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 11.2 million barrels in the week ending January 5. Gasoline inventories rose by 4.3 million barrels and distillate stockpiles rose by about 4.7 million barrels. For the same period, analysts polled had consensus estimates for a decrease of 3.89 million barrels in crude inventories, a rise of about 2.65 million barrels in gasoline and an increase of 1.46 million barrels in distillate stockpiles.

Total gasoline inventories increased by 4.1 million barrels last week, according to the EIA, and have moved near the top of the five-year average range. U.S. refineries produced about 9.5 million barrels of gasoline a day last week, down by about 200,000 a day compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged about 9.1 million barrels a day for the past four weeks, up about 2.5% compared with the same period a year ago.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for February delivery traded up about 0.6% at around $63.35 a barrel, and it moved down to around $63.10 after the report’s release, before returning to $63.25 minutes later. WTI settled at $62.96 on Wednesday and opened at $63.41 Wednesday morning. The 52-week range on February futures is $43.76 to $63.67, and the high was posted this morning.

As crude oil prices have crept above $60 a barrel, exploration and production companies have felt less need to hedge future production against falling crude price. Analysts at RBC Capital Markets said in late December that at least 60% of 2018 U.S. crude production was hedged. As crude prices go up, hedging cost producers money because they have to sell at lower than market prices.

Several large producers, include Continental Resources, Anadarko and EOG Resources, have few or no hedged barrels. As long as prices continue to rise, these drillers will be able to glean every available dollar.

Companies that have invested more heavily may lag behind. Cowen identified a few of these in a report from Bloomberg: Concho Resources, Lonestar Resources, Oasis Petroleum and QEP Resources.

Week over week, U.S. crude oil exports fell by 460,000 barrels a day last week, and U.S. production decreased by 290,000 barrels a day to 9.49 million a day. Exports averaged 1.015 million barrels a day last week and have a cumulative daily average for the year of 1.015 million barrels a day, a 40% increase over the year-ago export total.

Distillate inventories increased by a 4.3 million barrels last week and remain in the middle of the average range for this time of year. Distillate product supplied averaged about 3.9 million barrels a day for the past four weeks, up by 6.8% compared with the same period last year. Distillate production averaged 5.3 million barrels a day last week, down about 300,000 compared to the prior week’s production.

For the past week, crude imports averaged about 7.7 million barrels a day, down by 308,000 compared with the previous week. Refineries were running at 95.3% of capacity, with daily input averaging 17.3 million barrels a day, about 285,000 less than the previous week’s average. Exports of refined products rose by 660,000 barrels a day last week to 5.13 million.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.494, up about a penny from $2.485 a week ago and up about three cents per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.361 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 $86.68 in a 52-week range of $76.05 to $87.41. Over the past 12 months, Exxon stock has traded up about 0.8%.

Chevron Corp. (NYSE: CVX) traded up about 0.2%, at $128.07 in a 52-week range of $102.55 to $128.94. As of last night’s close, Chevron shares are trading up about 11.4% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded up about 0.8%, at $12.67 in a 52-week range of $8.65 to $12.68. The high was posted today.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded down about 0.3%, at $28.08 in a 52-week range of $21.70 to $35.20.