Crude Oil Price Rises on Surprise 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 2.6 million barrels last week, maintaining a total U.S. commercial crude inventory of 428.3 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 fell by about 2.7 million barrels in the week ending March 6. Gasoline inventories fell by 1.07 million barrels and distillate stockpiles decreased by 1.93 million barrels. For the same period, analysts had consensus estimates for an increase of 2.6 million barrels in crude inventories, a decrease of about 2 million barrels in gasoline inventories and an increase of 1.2 million barrels in distillate stockpiles.

Total gasoline inventories decreased by 1.7 million barrels last week, according to the EIA, and have moved near the upper limit of the five-year average range. U.S. refineries produced over 9.9 million barrels of gasoline a day last week, up by about 400,000 barrels a day compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged about 9.3 million barrels a day for the past four weeks, up about 2.5% compared with the same period a year ago.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for May delivery traded up about 0.8%, at around $64.23 a barrel, and rose to around $64.42 (up 1.1%) shortly after the report’s release. WTI settled at $63.54 on Tuesday and opened at $63.70 Wednesday morning. The 52-week range on May futures is $44.34 to $66.02.

Today’s surprise decline in U.S. crude inventories coincided with concerns related possible disruptions in crude supplies from the Middle East. The visit to the United States this week by Saudi Arabian Crown Prince Mohammed bin Salman has raised the possibility that the U.S. may reinstate sanctions on Iran, a threat/promise from the president since the early days of his administration.

Week over week, U.S. crude oil exports fell by 169,000 barrels a day last week, and U.S. production rose by 26,000 barrels a day to 10.41 million barrels. Exports averaged 1.57 million barrels a day last week and have a cumulative daily average for the year of 1.48 million barrels a day, a 97% increase over the year-ago export total.

Distillate inventories decreased by 2 million barrels last week and have moved to the lower half of the average range for this time of year. Distillate product supplied averaged 3.9 million barrels a day for the past four weeks, down by 4.5% compared with the same period last year. Distillate production averaged 4.5 million barrels a day last week, about flat compared to the prior week’s production.

For the past week, crude imports averaged about 7.1 million barrels a day, down by 508,000 compared with the previous week. Refineries were running at 91.7% of capacity, with daily input averaging about 16.8 million barrels a day, about 410,000 more than the previous week’s average. Exports of refined products fell by 169,000 barrels a day last week to 4.99 million.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.566, up more than four cents from $2.524 a week ago and four cents higher per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.293 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 0.8%, at $74.61 in a 52-week range of $73.53 to $89.30. Over the past 12 months, Exxon stock has traded down about 9.4%.

Chevron Corp. (NYSE: CVX) traded up about 1.8%, at $116.50 in a 52-week range of $102.55 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 1.8% to $13.04, in a 52-week range of $8.65 to $13.30.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded up about 3.7%, at $25.07 in a 52-week range of $21.70 to $31.54.

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