Crude Oil Price Remains Sunk Following Massive Inventory Drop

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The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Thursday morning showing that U.S. commercial crude inventories decreased by 7.3 million barrels last week, maintaining a total U.S. commercial crude inventory of 443.2 million barrels. The commercial crude inventory is now about 6% higher than the five-year average for this time of year.

Tuesday evening, the American Petroleum Institute (API) reported that crude inventories increased by about 5.4 million barrels in the week ending November 30. Gasoline inventories increased by 3.6 million barrels, and distillate stockpiles rose by about 4.3 million barrels. For the same period, analysts expected crude inventories to fall by about 2.3 million barrels. Gasoline inventories were seen up about 1.3 million barrels and distillate inventories were expected to rise by about 1.6 million barrels.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for January delivery traded down nearly 4% for the day at around $50.63 a barrel, and it traded at $51.03 shortly after the report’s release. WTI for January delivery opened at $53.02 Thursday morning, up about 0.2% from Wednesday’s settlement price of $52.89. The 52-week range on January futures is $49.47 to $76.55.

Thursday’s hot energy topic is the meeting of OPEC ministers that began today and reportedly already has resulted in a recommendation for an as-yet unspecified production cut next year. Oman’s energy minister said he believed the cuts will total a million barrels a day. OPEC’s non-member partners will join the members tomorrow to hammer out the quotas. The agreement, if one is reached, would last for six months.

While the process that OPEC and its partners are following is the same one they followed when quotas were first introduced two years ago, impatient investors interpreted the delay on an announcement until Friday as a reason to sell off barrels on Thursday.

U.S. exports of crude oil jumped sharply by about 5 million barrels last week, accounting for nearly all the reported inventory decline, but even the massive drop in inventory couldn’t overcome the worries over what OPEC will announce.

Finally, a good laugh from Tom Kloza at OPIS: Eh-PEC, the one-province cartel formerly known as Alberta.

Total gasoline inventories increased by 1.7 million barrels last week, according to the EIA, and are now 4% above the five-year average range. U.S. refineries produced about 9.7 million barrels of gasoline a day last week, down by around 500,000 barrels compared with the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged 9.1 million barrels a day for the past four weeks, down by about 100,000 barrels compared with the prior week’s average.

Week over week, U.S. crude oil exports rose by 761,000 barrels a day last week and U.S. production remained unchanged at 11.7 million barrels a day, its highest level ever. Exports averaged 3.2 million barrels a day last week and have a cumulative daily average for the year of 1.93 million barrels a day, a 104% increase over the year-ago export total.

Distillate inventories jumped by 3.8 million barrels last week and are about 5% below the five-year average range for this time of year. Distillate product supplied averaged 4.1 million barrels a day for the past four weeks, down by about 100,000 barrels compared with the prior week’s average. Distillate production averaged 5.6 million barrels a day last week, up by about 100,000 compared with the prior week’s production.

For the past week, crude imports averaged 7.2 million barrels a day, down by 943,000 barrels compared with the previous week. Refineries were running at 95.5% of capacity, with daily input averaging 17.5 million barrels a day, about 66,000 barrels a day less than the previous week’s average. Exports of refined products fell by 42,000 barrels a day last week to about 5.85 million barrels a day.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.443, down nearly seven cents from $2.511 a week ago and down by more than 30 cents compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.477 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 2.5%, at $77.41 in a 52-week range of $72.16 to $89.30. Over the past 12 months, Exxon stock has traded down by about 5.9%.

Chevron Corp. (NYSE: CVX) traded down about 3%, at $113.60 in a 52-week range of $108.02 to $133.88. As of last night’s close, Chevron shares are trading down about 5% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded down about 3.4%, at $10.80 in a 52-week range of $10.51 to $16.24.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded down about 5.2%, at $16.92 in a 52-week range of $16.91 to $29.87. The low was posted after this morning’s report was released.