Crude Oil Price Jumps on Bullish Inventory Report

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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 1.6 million barrels last week, maintaining a total U.S. commercial crude inventory of 420.5 million barrels. The commercial crude inventory remains in the lower half of the average range for this time of year.

Wednesday evening the American Petroleum Institute (API) reported that crude inventories fell by about 900,000 barrels in the week ending February 16. Gasoline inventories rose by 1.47 million barrels and distillate stockpiles decreased by 3.56 million barrels. For the same period, analysts had consensus estimates for an increase of 1.33 million barrels in crude inventories, a rise of about 1.23 million barrels in gasoline and a decrease of 1.63 million barrels in distillate stockpiles.

Total gasoline inventories increased by 300,000 barrels last week, according to the EIA, and remain in the upper half of the five-year average range. U.S. refineries produced about 10.1 million barrels of gasoline a day last week, up by about 500,000 barrels a day compared to 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, up about 5.4% compared with the same period a year ago.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for April delivery traded down about 0.1% at around $61.63 a barrel, and it rose to around $62.31 (up 1%) shortly after the report’s release. WTI settled at $61.68 on Wednesday and opened at $61.34 Thursday morning. The 52-week range on April futures was $44.17 to $66.39.

Domestic demand for gasoline is expected to increase by just 40,000 barrels a day this year, according to the EIA. Last year, growth was flat, following increases of 260,000 barrels a day in 2015 and 140,000 barrels a day in 2016.

Steady price increases have cooled Americans’ consumption of gasoline. Pump prices are now 60 cents a gallon higher than they were two years ago and, if history is any guide, the closer the national average gets to $3.00 a gallon, the less U.S. consumers drive. The sluggish demand growth likely will cause a shift in refinery priorities and markets. Refiners may decide to boost diesel fuel production and target emerging markets for exports of both diesel fuel and gasoline.

Watch for a tightening of the difference (spread) between the price of WTI crude and Brent crude. The spread is less than $2.50 this morning. As WTI approaches parity with Brent, domestic prices for refined products could rise even more.

Week over week, U.S. crude oil exports rose by 722,000 barrels a day last week and U.S. production was essentially flat at 10.27 million barrels a day. Exports averaged 2.04 million barrels a day last week and have a cumulative daily average for the year of 1.47 million barrels a day, a 91% increase over the year-ago export total.

Distillate inventories decreased by 2.4 million barrels last week and remain in the middle of the average range for this time of year. Distillate product supplied averaged over 4.1 million barrels a day for the past four weeks, up by 4.3% compared with the same period last year. Distillate production averaged over 4.5 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 7 million barrels a day, down by 867,000 barrels a day compared with the previous week. Refineries were running at 88.1% of capacity, with daily input averaging about 15.8 million barrels a day, about 329,000 barrels a day less than the previous week’s average. Exports of refined products dipped by 244,000 barrels a day last week to 4.71 million.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.525, down 2.7 cents from $2.552 a week ago and more than a penny per gallon less compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.285 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 2.1%, at $76.46 in a 52-week range of $73.90 to $89.30. Over the past 12 months, Exxon stock has traded down about 5.6%.

Chevron Corp. (NYSE: CVX) traded up about 1.5%, at $110.71 in a 52-week range of $102.55 to $133.88. As of last night’s close, Chevron shares are trading up about 0.4% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded up about 2.4%, at $12.58 in a 52-week range of $8.65 to $13.30.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded up about 3.3% to $24.55, in a 52-week range of $21.70 to $33.12.