Crude Oil Price Drops on Unexpected Stockpile Build

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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 increased by 1.2 million barrels last week, maintaining a total U.S. commercial crude inventory of 417.9 million barrels. The commercial crude inventory is about 2% below the five-year average for this time of year.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories fell by 4.5 million barrels in the week ending June 29. Gasoline inventories decreased by 3.1 million barrels and distillate stockpiles fell by about 440,000 barrels. For the same period, analysts expected crude inventories to decrease by about 4.5 million barrels. Gasoline inventories were seen down by 2.5 million barrels and distillate inventories were expected to fall by 1 250,000 barrels.

Total gasoline inventories decreased by 1.5 million barrels last week, according to the EIA, and remained about 6% above the five-year average range. U.S. refineries produced about 10.3 million barrels of gasoline a day last week, up by about 200,000 barrels a day compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged 9.7 million barrels a day for the past four weeks, also up about 200,000 barrels a day compared with the prior week.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for August delivery traded down about 0.8%, at around $74.01 a barrel, and fell to around $73.25 (down about 1.8%) shortly after the report’s release. WTI settled at $74.14 on Tuesday and opened at $73.63 Thursday morning. The 52-week range on August futures is $46.51 to $75.57.

U.S. President Trump continues to bash Saudi Arabia, in particular, and OPEC, in general, to raise production, which he believes will lead to lower prices. Trump points to the 2 million barrels that the Saudis claim as spare capacity as the oil that should be pumped right now.

What Trump fails to understand (or care about if he does understand) is that the Saudi spare capacity has reached an all-time low and that, even if they wanted to add 2 million barrels a day to global production by the end of the week, it couldn’t be done. Nor is it in their best interests to open the taps further. The president will just have to wait or put a little more effort into crushing Iran, something both he and the Saudis agree needs to happen.

U.S. crude oil exports fell by 664,000 barrels a day last week and U.S. production remained flat again at 10.9 million barrels. Exports averaged 2.34 million barrels a day last week and have a cumulative daily average for the year of 1.83 million barrels a day, a 142% increase over the year-ago export total.

Distillate inventories rose by 100,000 barrels last week and are about 13% below the five-year average range for this time of year. Distillate product supplied averaged 4 million barrels a day for the past four weeks, up by about 200,000 compared with the prior week. Distillate production averaged 5.5 million barrels a day last week, up by about 100,000 compared to the prior week’s production.

For the past week, crude imports averaged 9.1 million barrels a day, up by 699,000 compared with the previous week. Refineries were running at 97.1% of capacity, with daily input averaging 17.7 million barrels a day, about 163,000 less than the previous week’s average. Exports of refined products fell by 404,000 barrels a day last week to 5.14 million.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.866, up nearly two cents from $2.848 a week ago and down more than seven cents per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.231 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 0.4%, at $82.58 in a 52-week range of $72.16 to $89.30. Over the past 12 months, Exxon stock has traded up about 2.4%.

Chevron Corp. (NYSE: CVX) traded up about 0.2%, at $124.97 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 0.3%, at $14.88 in a 52-week range of $9.00 to $15.08.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded up about 0.3%, at $25.84 in a 52-week range of $21.70 to $29.87.