Crude Oil Price Turns Higher on Big Inventory Draw

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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 6.9 million barrels last week, maintaining a total U.S. commercial crude inventory of 412.7 million barrels. The commercial crude inventory remained in the middle of the average range for this time of year.

Wednesday evening the American Petroleum Institute (API) reported that crude inventories fell by about 5.12 million barrels in the week ending January 12. Gasoline inventories rose by 1.78 million barrels and distillate stockpiles rose by about 609,000 barrels. For the same period, analysts polled had consensus estimates for a decrease of 3.54 million barrels in crude inventories, a rise of about 3.43 million barrels in gasoline and an increase of 86,000 barrels in distillate stockpiles.

Total gasoline inventories increased by 3.6 million barrels last week, according to the EIA, and have moved to the middle of the five-year average range. U.S. refineries produced over 9.7 million barrels of gasoline a day last week, up by about 200,000 barrels a day compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged 8.9 million barrels a day for the past four weeks, up about 3.9% compared with the same period a year ago.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for February delivery traded down about 0.8% at around $63.49 a barrel, and it rose to around $63.69 afterward. WTI settled at $63.97 on Wednesday and opened at $64.07 Thursday morning. The 52-week range on February futures is $43.76 to $64.89.

U.S. crude oil production is expected to reach 10 million barrels a day sometime next month, and rising well counts presage an even higher total if prices remain above $60 a barrel.

In its monthly report released this morning, OPEC expects U.S. production to rise by 1.15 million barrels a day in 2018, keeping the pressure on the cartel and its allies to extend their production cuts even as prices rise and invite more drilling. OPEC has never been very good at judging when to turn the taps on or off, and it does not appear that its luck will improve this time around.

Week over week, U.S. crude oil exports rose by 243,000 barrels a day last week, and U.S. production increased by 258,000 barrels a day to 9.75 million barrels a day. Exports averaged 1.25 million barrels a day last week and have a cumulative daily average for the year of 1.16 million barrels a day, a 63% increase over the year-ago export total.

Distillate inventories decreased by 3.9 million barrels last week and moved into the lower half of the average range for this time of year. Distillate product supplied averaged 4.1 million barrels a day for the past four weeks, up by 16% compared with the same period last year. Distillate production averaged 5.1 million barrels a day last week, down about 200,000 barrels a day compared to the prior week’s production.

For the past week, crude imports averaged about 8 million barrels a day, up by 292,000 barrels a day compared with the previous week. Refineries were running at 93% of capacity, with daily input averaging 16.9 million barrels a day, about 448,000 less than the previous week’s average. Exports of refined products slipped by 23,000 barrels a day last week to 5.11 million barrels a day.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.536, up nearly four cents from $2.508 a week ago and nearly 11 cents per gallon higher compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.332 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 0.5%, at $87.55 in a 52-week range of $76.05 to $88.21. Over the past 12 months, Exxon stock has traded up about 1.5%.

Chevron Corp. (NYSE: CVX) traded down about 0.7%, at $131.49 in a 52-week range of $102.55 to $133.88. As of last night’s close, Chevron shares are trading up about 13.5% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded up about 0.2%, at $12.80 in a 52-week range of $8.65 to $12.92.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded down about 0.1%, at $28.65 in a 52-week range of $21.70 to $35.04.