Crude Oil Price Tops $65 on Storage Drawdown

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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 1.1 million barrels last week, maintaining a total U.S. commercial crude inventory of 411.6 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 rose by about 4.76 million barrels in the week ending January 19. Gasoline inventories rose by 4.12 million barrels and distillate stockpiles fell by about 1.28 million barrels. For the same period, analysts polled had consensus estimates for a decrease of 1.6 million barrels in crude inventories, a rise of about 2.49 million barrels in gasoline and a decrease of 1.47 million barrels in distillate stockpiles.

Total gasoline inventories increased by 3.1 million barrels last week, according to the EIA, and remain in the middle of the five-year average range. U.S. refineries produced about 9.4 million barrels of gasoline a day last week, down by about 300,000 compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged 8.7 million barrels a day for the past four weeks, up about 5.4% compared with the same period a year ago.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for March delivery traded up about 0.1% at around $64.56 a barrel, and it moved up to around $65.10 after the report’s release. WTI settled at $64.47 on Tuesday and opened at $64.42 Wednesday morning. The prior 52-week range on March futures was $43.91 to $64.88.

Net long positions in the six most important petroleum-related futures and options contracts — Brent, NYMEX and ICE WTI, U.S. gasoline, U.S. heating oil and European gasoil — have surged by a massive 1.13 billion barrels since the end of June 2017, according to Reuters oil market analyst John Kemp. Between January 2 and January 16, net long positions in WTI rose from 455 million barrels to 542 million barrels, compared with “only a minor” increase in Brent contracts.

Hedge fund (speculative) long positions now outnumber shorts by 10.5-to-one. Hedge funds hold nearly 1.6 billion barrels of long positions across the six major contracts, up more than 80% since June. When the petroleum market gets that lopsided, some fund managers look to take profits and the direction of prices makes a U-turn.

U.S. crude oil exports rose by 162,000 barrels a day last week, and U.S. production increased week over week by 128,000 barrels a day to 9.88 million. Exports averaged 1.41 million barrels a day last week and have a cumulative daily average for the year of 1.26 million barrels a day, an 88% increase over the year-ago export total.

Distillate inventories increased by 600,000 barrels last week and remain in the lower half of the average range for this time of year. Distillate product supplied averaged about 4 million barrels a day for the past four weeks, up by 15.3% compared with the same period last year. Distillate production averaged over 4.8 million barrels a day last week, down about 300,000 barrels a day compared to the prior week’s production.

For the past week, crude imports averaged over 8 million barrels a day, up by 91,000 compared with the previous week. Refineries were running at 90.9% of capacity, with daily input averaging 16.5 million barrels a day, about 392,000 less than the previous week’s average. Exports of refined products slipped by 305,000 barrels a day last week to 4.8 million.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.553, up nearly two cents from $2.534 a week ago and nearly 11 cents per gallon higher than the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.297 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 0.6%, at $88.82 in a 52-week range of $76.05 to $88.92, and the high was set this morning. Over the past 12 months, Exxon stock has traded up about 4.4%.

Chevron Corp. (NYSE: CVX) traded up about 1.1%, at $132.49 in a 52-week range of $102.55 to $133.88. As of last night’s close, Chevron shares are trading up about 13.8% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded up about 0.5%, at $13.04 in a 52-week range of $8.65 to $13.07. The high was set this morning.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded down about 1.1% to $29.01, in a 52-week range of $21.70 to $35.04.