Crude Oil Price Slips on Big Hike in Supply

February 28, 2018 by Paul Ausick

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning showing that U.S. commercial crude inventories increased by 3 million barrels last week, maintaining a total U.S. commercial crude inventory of 423.5 million barrels. The commercial crude inventory remains in the lower half of the average range for this time of year.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories rose by about 933,000 barrels in the week ending February 23. Gasoline inventories rose by 1.9 million barrels and distillate stockpiles decreased by 1.4 million barrels. For the same period, analysts had consensus estimates for an increase of 2.1 million barrels in crude inventories and an increase of about 200,000 barrels in both gasoline and distillate stockpiles.

Total gasoline inventories increased by 2.5 million barrels last week, according to the EIA, and remain in the upper half of the five-year average range. U.S. refineries produced about 9.4 million barrels of gasoline a day last week, down by about 700,000 compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged 9 million barrels a day for the past four weeks, up about 3.8% compared with the same period a year ago.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for April delivery traded up about 0.2% at around $63.13 a barrel, and it fell to around $62.56 (down 0.8%) shortly after the report’s release. WTI settled at $63.01 on Tuesday and opened at $62.82 Wednesday morning. The 52-week range on April futures was $44.17 to $66.39.

Hedge funds and other managed money petroleum traders sold off about 48 million barrels of long contracts on crude oil and refined products in the futures and options market for the week that ended February 20, for a total reduction in long barrels of 263 million over the past four weeks.

The decline in net long positions is almost entirely the result of profit-taking — no one wants to take a short position. Well, at least no one with a lot of money to gamble with. Comments a week ago by the Saudi oil minister to the effect that the cartel’s production cuts would last through the end of 2018 have helped stabilize prices and may have deterred even more selling.

Week over week, U.S. crude oil exports fell by 599,000 barrels a day last week and U.S. production rose by 13,000 barrels a day to 10.28 million barrels. Exports averaged 1.45 million barrels a day last week and have a cumulative daily average for the year of 1.47 million barrels a day, a 92% increase over the year-ago export total.

Distillate inventories decreased by 1 million barrels last week and remain in the middle of the average range for this time of year. Distillate product supplied averaged over 4 million barrels a day for the past four weeks, up by 0.9% compared with the same period last year. Distillate production averaged 4.5 million barrels a day last week, roughly flat compared to the prior week’s production.

For the past week, crude imports averaged 7.3 million barrels a day, up by 261,000 barrels a day compared with the previous week. Refineries were running at 87.8% of capacity, with daily input averaging about 15.9 million barrels a day, about 49,000 more than the previous week’s average. Exports of refined products dropped by 4844,000 barrels a day last week to 4.22 million.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.53, down less than a penny from $2.526 a week ago and down by more than three cents per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.30 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 0.4%, at $77.47 in a 52-week range of $73.90 to $89.30. Over the past 12 months, Exxon stock has traded down about 4.8%.

Chevron Corp. (NYSE: CVX) traded up about 0.7%, at $114.38 in a 52-week range of $102.55 to $133.88. As of last night’s close, Chevron shares are trading up about 1.7% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded down about 1%, at $12.53 in a 52-week range of $8.65 to $13.30.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded down about 1.1%, at $24.28 in a 52-week range of $21.70 to $33.12.