Crude Oil Price Falls on Huge Inventory Increase

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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 5.8 million barrels last week, maintaining a total U.S. commercial crude inventory of 438.1 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 fell by 1.3 million barrels in the week ending May 18. Gasoline inventories increased by nearly 1 million barrels, and distillate stockpiles decreased by about 1.3 million barrels. For the same period, analysts expected crude inventories to decrease by about 1.5 million barrels and gasoline inventories to drop by 1.4 million barrels. Diesel inventories are seen down about 1.3 million barrels.

Total gasoline inventories increased by 1.9 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 10 million barrels of gasoline a day last week, down by about 500,000 barrels compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged over 9.5 million barrels a day for the past four weeks, up about 1% compared with the same period a year ago.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for July delivery traded down about 0.2% at around $72.01 a barrel, and it dropped to around $71.30 (down about 1.2%) shortly after the report’s release. WTI settled at $72.20 on Tuesday and opened at $72.13 Wednesday morning. The 52-week range on July futures is $45.18 to $72.90.

The price drop of both WTI and Brent crude oil this week is being attributed to sanctions on Iran and increased sanctions on Venezuela following last weekend’s re-election of Nicolas Maduro. Venezuela has been producing about 500,000 barrels a day less than its quota under the OPEC production cuts, and more U.S. sanctions could cut that number even further.

Crude oil exports fell last week and refinery utilization rose ahead of the Memorial Day weekend. As we might expect, pump prices for gasoline also rose and are now near the predicted $2.95 national average for the holiday weekend.

Week over week, U.S. crude oil exports fell by 818,000 barrels a day, and U.S. production rose by 2,000 barrels a day to 10.73 million. Exports averaged 1.75 million barrels a day last week and have a cumulative daily average for the year of 1.69 million barrels a day, a 122% increase over the year-ago export total.

Distillate inventories decreased by a 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, down by 1.9% compared with the same period last year. Distillate production averaged over 4.9 million barrels a day last week, down about 100,000 barrels a day compared to the prior week’s production.

For the past week, crude imports averaged about 8.2 million barrels a day, up by 558,000 compared with the previous week. Refineries were running at 91.8% of capacity, with daily input averaging over 16.6 million barrels a day, about 7,000 less than the previous week’s average. Exports of refined products rose by 494,000 barrels a day last week to 5.13 million.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.947, up 5.6 cents from $2.891 a week ago and up 18.4 cents per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.361 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 0.6%, at $81.20 in a 52-week range of $72.16 to $89.30. Over the past 12 months, Exxon stock has traded down about 1.5%.

Chevron Corp. (NYSE: CVX) traded down about 1%, at $126.90 in a 52-week range of $102.55 to $133.88. As of last night’s close, Chevron shares are trading up about 19.4% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded down about 0.9% to $14.43, in a 52-week range of $8.65 to $14.74.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded down about 1.9%, at $28.41 in a 52-week range of $21.70 to $29.87.