US Distillate Inventories Rose for 4th Time in 11 Weeks
US distillate inventories
The EIA (U.S. Energy Information Administration) reported that US distillate inventories rose by 2.5 MMbbls (million barrels) to 156.7 MMbbls between November 25 and December 2, 2016. US distillate inventories rose for the fourth time in the last 11 weeks. US distillate inventories hit six-year seasonal highs of 165 MMbbls for the week ending September 9, 2016.
A market survey estimated that US distillate inventories would rise by 1.8 MMbbls for the same period. Diesel futures fell on December 7, 2016, due to the larger-than-expected rise in distillate inventories. For more information on crude oil and diesel prices, read part one and part seven of this series.
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Distillate production and demand
US distillate production fell by 133,000 bpd (barrels per day) to 5,083,000 bpd between November 25 and December 2, 2016. US distillate imports fell by 68,000 bpd to 104,000 bpd for the same period. Weekly distillate demand fell by 138,000 bpd to 3,704,000 bpd for the same period.
Impact on stocks and ETFs
US distillate inventories are 4.8% higher than they were in the same period in 2015. They’re also above the upper range for the last five years. High distillate inventories could pressure diesel fuel and crude oil prices.
Lower diesel fuel prices can have a negative impact on the earnings of US refiners and crude oil producers like Tesoro (TSO), Valero Energy (VLO), Bonanza Creek Energy (BCEI), Comstock Resources (CRK), Swift Energy (SFY), SM Energy (SM), and Northern Tier Energy (NTI).
Moves in crude oil and refined products prices can impact funds such as the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Fidelity MSCI Energy (FENY), the Direxion Daily Energy Bear 3x (ERY), the ProShares Ultra Bloomberg Crude Oil ETF (UCO), the iShares Global Energy ETF (IXC), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), the First Trust Energy AlphaDEX Fund (FXN), the United States Gasoline Fund (UGA), and the VelocityShares 3x Long Crude Oil ETN (UWTI).
Read Saudi Arabia: Weather Will Be a Key Demand Driver of Oil in 2H16 and Winners and Losers in Energy after the US Election Results for more on crude oil.
Read Contango Market and OPEC: Will They Impact Crude Oil Prices? and Will Crude Oil Prices Test 3 Digits Again? to learn about crude oil price forecasts.
For ongoing analysis, visit Market Realist’s Upstream Oil and Gas page.