Crude Oil Price Sinking on Large Increase to Inventory

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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 431.8 million barrels. The commercial crude inventory is now about 3% higher than the five-year average for this time of year.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories increased by about 7.83 million barrels in the week ending November 2. Gasoline inventories decreased by 1.2 million barrels, and distillate stockpiles dropped by about 3.64 million barrels. For the same period, analysts expected crude inventories to increase by about 2.1 million barrels. Gasoline inventories were seen down about 2.6 million barrels, and distillate inventories were also expected to fall by about 2.8 million barrels.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for December delivery traded up about 0.2% at around $62.35 a barrel, and it traded at $62.27 shortly after the report’s release. WTI for December delivery opened at $61.73 Wednesday morning, down about 0.8% from Tuesday’s settlement price of $62.21. The 52-week range on December futures is $53.79 to $76.72.

The energy industry mostly came through the midterm elections unscathed. In fact, you could say it dodged a couple of bullets. First, a Colorado initiative that would have increased the setback for any new oil and gas drilling from 500 to 2,500 feet from a dwelling. Despite claims that drilling and fracking are adversely affecting public health, about 57% of the state’s voters rejected the enlarged setbacks. According to Ballotpedia, supporters of the initiative raised and spent about $1.19 million while opponents spend $30.28 million.

In Washington state, voters rejected an initiative that would have created the country’s first tax on carbon emissions from burning fossil fuels. Voters rejected the measure by a margin of about 12 points, 56% to 44%. Opponents of the measure, primarily from the oil industry, raised $31 million, compared to proponents’ estimated $15 million, including $1 million from Microsoft co-founder Bill Gates.

Voters in Florida approved a constitutional amendment (Amendment 9) banning offshore oil drilling in the state’s territorial waters. The same measure also bans the use of electronic cigarettes in most enclosed workplaces. Over two-thirds (68.7%) of voters approved the measure.

Total gasoline inventories increased by 1.9 million barrels last week, according to the EIA, and are now 8% above the five-year average range. U.S. refineries produced about 9.7 million barrels of gasoline a day last week, down by around 700,000 barrels compared with the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged 9.2 million barrels a day for the past four weeks, about flat compared with the prior week’s average.

Week over week, U.S. crude oil exports fell by 80,000 barrels a day last week and U.S. production rose by 400,000 barrels to 11.6 million barrels a day, its highest level ever. Exports averaged 2.41 million barrels a day last week and have a cumulative daily average for the year of 1.88 million barrels a day, a 108% increase over the year-ago export total.

Distillate inventories fell by 3.5 million barrels last week and are about 6% below the five-year average range for this time of year. Distillate product supplied averaged 4.1 million barrels a day for the past four weeks, down by about 100,000 barrels compared with the prior week’s average. Distillate production averaged 5 million barrels a day last week, unchanged compared with the prior week’s production.

For the past week, crude imports averaged 7.5 million barrels a day, up by 195,000 barrels a day compared with the previous week. Refineries were running at 90% of capacity, with daily input averaging 16.4 million barrels a day, about 9,000 barrels a day less than the previous week’s average. Exports of refined products fell by 422,000 barrels a day last week to about 4.93 million barrels a day.

Rising crude oil production and continuing low refinery utilization combined to boost crude oil inventories last week. The decline in refined product exports boosted the amount of products by 1.24 million barrels last week.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.745, down more than five cents from $2.801 a week ago and down by nearly 17 cents compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.535 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 0.1%, at $81.91 in a 52-week range of $72.16 to $89.30. Over the past 12 months, Exxon stock has traded up by about 2.1%.

Chevron Corp. (NYSE: CVX) traded up about 0.6%, at $119.65 in a 52-week range of $108.02 to $133.88. As of last night’s close, Chevron shares are trading up about 2% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded down about 0.9% to $13.06, in a 52-week range of $11.02 to $16.24.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded up about 0.1%, at $21.18 in a 52-week range of $20.10 to $29.87.