Crude Oil Price Jumps Following Inventory Report

Oil Barrels
Source: Thinkstock
The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 3.4 million barrels last week, maintaining a total U.S. commercial crude inventory of 480 million barrels. The commercial crude inventory remains near levels not seen at this time of year in at least the past 80 years.

Tuesday evening, the American Petroleum Institute (API) reported that crude inventories rose by 4.1 million barrels in the week ending October 16. For the same period, analysts had estimated an increase of 3.7 million barrels in crude inventories.

Total gasoline inventories decreased by 1.5 million barrels last week, according to the EIA, but remain above the upper limit of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged about 9.1 million barrels a day for the past four weeks, up by 3.1% compared with the same period a year ago.

Congressional leaders and President Obama agreed earlier this week to sell some 58 million barrels out of the U.S. Strategic Petroleum Reserve (SPR) as part of a deal to prevent another government shutdown at the end of this week. The sales, at an annual rate of around 5 million barrels, would take place between 2018 and 2025. Proceeds from the sale would go to the U.S. Treasury’s general fund.

There are plenty of arguments for reducing the size of the U.S. strategic reserve. In this case the reason is Congress lacks the will to raise taxes to pay for needed services — and that’s among the weakest reasons. The SPR held more than 726 million barrels in 2009 and holds about 691 million barrels today. The U.S. released about 31 million barrels in 2011. Another 5 million barrels were sold as a “test” in 2014. The average cost to taxpayers of a barrel in the SPR was $29.70, before figuring in inflation.

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Earlier this year some lawmakers were considering selling about 100 million barrels from the SPR to fund the federal highway bill. That has gone nowhere, but now that the SPR piggy bank has apparently been opened for business, expect a line to form at the withdrawal window.
In the futures market last week, hedge funds added to their futures short positions on benchmark West Texas Intermediate (WTI) crude oil. In the Commitment of Traders report for October 20, published by the Commodity Futures Trading Commission (CFTC) last Friday, hedge funds dropped 3,574 long contracts and added 18,975 contracts to their short positions. Managed money holds 266,363 long positions, compared with 106,570 short positions. Open interest decreased by 32,389 contracts to 1,613,562 week over week.

Before the EIA report, WTI crude for December delivery traded up about 3.5% at around $44.69 a barrel. The WTI price shot higher to around $45.25 immediately following the report’s release, up about 4.8% on the day. This jump is too good to be true, so it will not last. The 52-week range on WTI futures is $39.22 to $81.61.

Distillate inventories decreased by 3 million barrels last week and remain in the middle of the average range for this time of year. Distillate product supplied averaged about 4 million barrels a day over the past four weeks, up by 10% when compared with the same period last year. Distillate production averaged 4.9 million barrels a day last week, up about 200,000 barrels a day compared with the prior week’s production.

For the past week, crude imports averaged over 7 million barrels a day, down by 439,000 barrels a day compared with the previous week. Refineries were running at 87.6% of capacity, with daily input of over 15.6 million barrels, about 271,000 barrels a day above the previous week’s average. Refinery throughput is about 360,000 barrels a day higher than it was two weeks ago as refiners complete turnaround and maintenance and return to production.

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According to AAA, the current national average pump price per gallon of regular gasoline is $2.195, down about 1.8% from $2.236 a week ago and from $2.29 a month ago. Last year at this time, a gallon of regular cost $3.034 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 1.5%, at $82.32 in a 52-week range of $66.55 to $97.20. Year to date, Exxon stock traded down about 11% and is down about 15% since early November, as of Tuesday’s close.

Chevron Corp. (NYSE: CVX) traded up about 2.1%, at $89.64 in a 52-week range of $69.58 to $120.17. As of Tuesday’s close, Chevron shares have dropped about 20% year to date, and they trade down more than 25% since early November 2014.

The United States Oil ETF (NYSEMKT: USO) traded up about 4.5%, at $14.44 in a 52-week range of $12.37 to $31.450.

The Market Vectors Oil Services ETF (NYSEMKT: OIH) traded up about 3.6% to $30.67, in a 52-week range of $26.00 to $45.95.

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