Crude Oil Price Pared Gain Following Modest Inventory Drop

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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 decreased by 1.2 million barrels last week, maintaining a total U.S. commercial crude inventory of 442 million barrels. The commercial crude inventory is now about 7% higher than the five-year average for this time of year.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories decreased by about 10.2 million barrels in the week ending December 7. Gasoline inventories increased by about 2.5 million barrels and distillate stockpiles rose by about 712,000 barrels. For the same period, analysts expected crude inventories to fall by about 3 million barrels. Gasoline inventories were seen up about 2.5 million barrels, and distillate inventories were expected to rise by about 1.8 million barrels.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for January delivery traded up about 0.8% for the day at around $52.15 a barrel, and it traded at $51.94 shortly after the report’s release. WTI for January delivery opened at $52.03 Wednesday morning, up about 0.7% from Wednesday’s settlement price of $51.65. The 52-week range on January futures is $49.47 to $76.55.

Last week’s OPEC meeting resulted in the cartel and its partners agreeing to reduce crude oil production by around 1.2 million barrels a day beginning January 1 and running through June of 2019. OPEC members will cut 800,000 barrels a day and its partners, including Russia, have agreed to cuts of 400,000 barrels a day.

Bank of America analysts see prices rising as a result:

The announced reduction should lead to a relatively balanced global oil market and will likely push Brent and WTI prices back to our respective expected averages of $70 [a barrel] and $59 [a barrel] in 2019.

The assumption, of course, is that the cuts happen. OPEC did not publish individual member quotas, which could mean that Saudi Arabia, which pushed hard for the reductions, will bear the largest share of the pain. However, according to the cartel’s monthly report published earlier today, Saudi production rose by 450,000 barrels a day in November. Cutting back from that level still leaves a healthy production level.

Total gasoline inventories increased by 2.1 million barrels last week, according to the EIA, and are now 3% above the five-year average range. U.S. refineries produced about 10.5 million barrels of gasoline a day last week, up by around 800,000 barrels compared with the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged 9.1 million barrels a day for the past four weeks, roughly flat compared with the prior week’s average.

Week over week, U.S. crude oil exports fell by 929,000 barrels a day last week and U.S. production dipped to 11.6 million barrels a day, down by 100,000 barrels a day week over week. Exports averaged 2.3 million barrels a day last week and have a cumulative daily average for the year of 1.93 million barrels a day, a 105% increase over the year-ago export total.

Distillate inventories decreased by 1.5 million barrels last week and are about 8% 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, flat compared with the prior week’s average. Distillate production averaged 5.5 million barrels a day last week, down by about 100,000 barrels compared with the prior week’s production.

For the past week, crude imports averaged 7.4 million barrels a day, up by 174,000 barrels compared with the previous week. Refineries were running at 95.1% of capacity, with daily input averaging 17.4 million barrels a day, about 51,000 barrels less than the previous week’s average. Exports of refined products fell by 306,000 barrels a day last week to about 5.54 million barrels a day.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.407, down less than a penny from $2.413 a week ago and down by 28 cents compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.454 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 0.3% at $76.94 in a 52-week range of $72.16 to $89.30. Over the past 12 months, Exxon stock has traded down by about 7.3%.

Chevron Corp. (NYSE: CVX) traded up about 1.1%, at $116.69 in a 52-week range of $108.02 to $133.88. As of last night’s close, Chevron shares are trading down about 2.5% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded up about 0.2% to $10.97, in a 52-week range of $10.51 to $16.24.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded up about 2.8%, at $16.712 in a 52-week range of $16.00 to $29.87.

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