Crude Oil Price Wobbles After Huge Addition to Stockpiles

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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 increased by 6.2 million barrels last week, maintaining a total U.S. commercial crude inventory of 436 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 3.4 million barrels in the week ending April 27. Gasoline inventories rose by about 1.6 million barrels, and distillate stockpiles decreased by 4.1 million barrels. For the same period, analysts expected crude inventories to increase by about 840,000 barrels and gasoline inventories to drop by 587,000 barrels. Diesel inventories are seen down about 1.3 million barrels.

Total gasoline inventories increased by 1.2 million barrels last week, according to the EIA, and remain in the upper half of the five-year average range. U.S. refineries produced over 10  million barrels of gasoline a day last week, up by more than 100,000 barrels compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged over 9.3 million barrels a day for the past four weeks, up about 1.2% compared with the same period a year ago.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for June delivery traded up about 0.1% at around $67.32 a barrel and dipped to around $67.05 (down about 0.3%) shortly after the report’s release. WTI settled at $67.25 on Tuesday and opened at $67.44 Wednesday morning. The 52-week range on June futures is $44.54 to $69.55.

As prices at the gas pump approach $3 a gallon for regular gasoline, oil industry analysts are beginning to wonder how much higher prices can rise before demand slackens. According to Reuters analyst John Kemp, real prices are now close to the average level for the whole of the last gasoline price cycle that lasted from 1998 to 2016. When the price moves nearer to its next peak, consumers will respond by closing their wallets.

The trick, according to Kemp, is guessing the price at which demand destruction begins. Some experts put the price at $80 a barrel for Brent while others are looking at a Brent price of $100 a barrel. While opinions vary widely, the fact remains that oil consumption does respond to price changes and there is no hard threshold that marks when that response begins.

Week over week, U.S. crude oil exports fell by 183,000 barrels a day last week and U.S. production rose by 33,000 barrels a day to 10.62 million barrels. Exports averaged 2.15 million barrels a day last week and have a cumulative daily average for the year of 1.62 million barrels a day, a 115% increase over the year-ago export total.

Distillate inventories decreased by 3.9 million barrels last week and remain in the lower half of the average range for this time of year. Distillate product supplied averaged about 4.2 million barrels a day for the past four weeks, up by just 0.1% compared with the same period last year. Distillate production averaged 5 million barrels a day last week, unchanged compared to the prior week’s production.

For the past week, crude imports averaged over 8.5 million barrels a day, up by 80,000 barrels a day compared with the previous week. Refineries were running at 91.1% of capacity, with daily input averaging about 16.6 million barrels a day, about 60,000 less than the previous week’s average. Exports of refined products fell by 991,000 barrels a day last week to 5 million barrels a day.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.814, up 3.2 cents from $2.782 a week ago and up nearly 16 cents per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.372 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 0.2%, at $76.82 in a 52-week range of $72.16 to $89.30. Over the past 12 months, Exxon stock has traded down about 6.3%.

Chevron Corp. (NYSE: CVX) traded up about 0.9%, at $126.03 in a 52-week range of $102.55 to $133.88. As of last night’s close, Chevron shares are trading up about 19.9% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded up about 0.2%, at $13.64 in a 52-week range of $8.65 to $14.00.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded up about 1.1%, at $27.20 in a 52-week range of $21.70 to $29.53.