Crude Oil Price Up as Petroleum Inventories Take a Surprise Dive

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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 4.1 million barrels last week, maintaining a total U.S. commercial crude inventory of 432.4 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 rose by 830,000 barrels in the week ending June 8. Gasoline inventories increased by 2.33 million barrels and distillate stockpiles increased by 2.1 million barrels. For the same period, analysts expected crude inventories to decrease by about 1.25 million barrels. Gasoline inventories are seen up by 1 million barrels and distillate inventories are expected to rise by 500,000 barrels.

Total gasoline inventories decreased by 2.3 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 10.5 million barrels of gasoline a day last week, up by about 800,000 barrels compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged about 9.6 million barrels a day for the past four weeks, up by about 100,000 barrels compared with the prior week.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for July delivery traded down about 0.2% at around $66.12 a barrel and rose to around $66.67 (up about the same amount) shortly after the report’s release. WTI settled at $66.36 on Tuesday and opened at $66.05 Wednesday morning. The 52-week range on July futures is $45.18 to $72.90.

The International Energy Agency this morning released its monthly market report for May including its first projections for the market in 2019. Supply is expected to rise by 2.2 million barrels a day this year with most of the gains coming from the United States.

The OPEC meeting scheduled for June 22 continues to attract a lot of speculation about what the cartel and its partners will do regarding their quotas now that global crude oil stockpiles have been reduced to around their five-year average levels. Expected sanctions against Iran and further declines in Venezuelan production threaten to push prices higher than Saudi Arabia–and President Trump–want to see. Trump is just huffing and puffing, but the Saudis and Russia can actually do something.

Increased U.S. production is coming primarily from the Permian Basin in west Texas and pipeline transportation out of the basin is nearly at capacity. We’ve noted this problem several times, but it’s worth mentioning again that rising production that is essentially stranded does little to improve supplies and nothing to lower prices.

Week over week, U.S. crude oil exports rose by 316,000 barrels a day last week and U.S. production rose by 100,000 barrels a day to 10.9 million barrels. Exports averaged 2.03 million barrels a day last week and have a cumulative daily average for the year of 1.73 million barrels a day, a 123% increase over the year-ago export total.

Distillate inventories decreased by 2.1 million barrels last week and remain in the lower half of the average range for this time of year. Distillate product supplied averaged over 4 million barrels a day for the past four weeks, up by about 100,000 barrels a day compared with the prior week. Distillate production averaged over 5.1 million barrels a day last week, down by about 200,000 barrels a day compared to the prior week’s production.

For the past week, crude imports averaged about 8.1 million barrels a day, down by 247,000 barrels a day compared with the previous week. Refineries were running at 95.7% of capacity, with daily input averaging about 17.5 million barrels a day, about 136,000 barrels a day more than the previous week’s average. Exports of refined products fell by 635,000 barrels a day last week to 4.68 million barrels a day.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.909, down about 4 cents from $2.941 a week ago and up 4 cents per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.329 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 0.2% at $82.26 in a 52-week range of $72.16 to $89.30. Over the past 12 months, Exxon stock has traded up about 0.8%.

Chevron Corp. (NYSE: CVX) traded down about 0.2%, at $126.81 in a 52-week range of $102.55 to $133.88. As of last night’s close, Chevron shares are trading up about 17.3% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded up about 0.3% at $13.44 in a 52-week range of $8.65 to $14.74.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded up less than 0.1% at $26.78 in a 52-week range of $21.70 to $29.87.

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