Crude Oil Price Bounces Higher Following Inventory Report

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The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 100,000 barrels last week, maintaining a total U.S. commercial crude inventory of 509.2 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 rose by 851,000 barrels in the week ending June 23. API also reported gasoline supplies increased by 1.35 million barrels and distillate inventories increased by 678,000 barrels.

For the same period, an S&P Global Platts survey of analysts had consensus estimates for an increase of 3.25 million barrels in crude inventories, a decrease of 900,000 barrels in gasoline inventories and a rise of 500,000 barrels in distillate stockpiles.

Total gasoline inventories decreased by 900,000 barrels last week, according to the EIA, but remain above the upper limit of the five-year average range. U.S. refineries produced about 10.3 million barrels of gasoline a day last week, up by about 100,000 barrels a day compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged 9.5 million barrels a day for the past four weeks, down by 2.4% compared with the same period a year ago.

The futures market for crude oil and refined products has apparently accepted the notion that OPEC will fail to deliver the rebalancing of the market that the production cuts of last November promised. Fund managers have pared their crude oil positions to just two long barrels for every short barrel, among the most bearish position since prices started tumbling in August of 2014.

Even more bearish are hedge funds’ net short positions on gasoline (21 million barrels) and distillates (27 million barrels). In the middle of February, hedge funds had piled up a record net long position of 1 billion barrels in crude oil and products. Now, the funds are adding short positions at a near-record pace, and there is some concern that the rise in short positions is getting crowded and threatens to ignite a price rise if (when) fund managers try to lock in profits and cover these short positions.

Looking at fundamentals like production, rig counts and refinery throughput, the market also looks weak. Refining throughput was down slightly last week, which is probably a more positive sign for crude producers than the slight dips in inventory.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for August delivery traded up about 0.1% at around $44.28 a barrel, and it fell to around $44.15 shortly after the report’s release. About 10 minutes after the EIA report was released, prices rose about $0.20 a barrel. WTI settled at $44.24 on Tuesday and opened at $43.67 Wednesday morning. The 52-week range on August futures is $42.06 to $58.30.

Distillate inventories decreased by 200,000 barrels last week and remain above the upper limit of the average range for this time of year. Distillate product supplied averaged over 3.9 million barrels a day over the past four weeks, up by 2.9% compared with the same period last year. Distillate production averaged over 5.2 million barrels a day last week, down less than 100,000 barrels a day compared with the prior week’s production.

For the past week, crude imports averaged over 8 million barrels a day, up by about 140,000 barrels a day compared with the previous week. Refineries were running at 92.5% of capacity, with daily input averaging 16.9 million barrels a day, about 262,000 barrels a day less than the previous week’s average.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.247, down 3.5 cents from $2.282 a week ago and down more than 13 cents per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.300 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 0.4%, at $81.43 in a 52-week range of $79.26 to $95.55. Over the past 12 months, Exxon stock has traded down about 10.8%.

Chevron Corp. (NYSE: CVX) traded up about 0.6%, at $104.71 in a 52-week range of $97.53 to $119.00. As of last night’s close, Chevron shares have added about 2.4% over the past 12 months.

The United States Oil ETF (NYSEMKT: USO) traded up about 0.7%, at $9.16 in a 52-week range of $8.65 to $12.00.

The VanEck Vectors Oil Services ETF (NYSEMKT: OIH) traded up about 1.6%, at $24.65 in a 52-week range of $23.91 to $36.35.