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Will US Crude Oil Production Overshadow Inventory Draws?

PART:
1 2 3 4 5
Part 5
Will US Crude Oil Production Overshadow Inventory Draws? PART 5 OF 5

US Distillate Inventories Rose for the First Time in 5 Weeks

US distillate inventories 

The EIA (U.S. Energy Information Administration) released its weekly crude oil inventory report on August 16, 2017. It reported that US distillate inventories rose by 0.7 MMbbls (million barrels) or 0.5% to 148.4 MMbbls on August 4–11, 2017. Inventories rose for the first time in five weeks. Inventories fell by 4.7 MMbbls or 3.1% from the same period in 2016.

A market survey estimated that distillate inventories would have fallen by 0.5 MMbbls on August 4–11, 2017. US diesel futures fell 1.6% to $1.57 per gallon on August 16, 2017, due to an unexpected rise in inventories. US crude oil (XLE) (XOP) (XES) futures also fell in the direction of diesel futures on August 16, 2017. For more on crude oil prices, read Part 1 of this series.

US Distillate Inventories Rose for the First Time in 5 Weeks

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Lower gasoline and diesel prices have a negative impact on refiners’ earnings like Phillips 66 (PSX) and Tesoro (TSO). Likewise, lower crude oil prices have a negative impact on oil producers’ earnings like Chevron (CVX), Northern Oil & Gas (NOG), and QEP Resources (QEP).

US distillate production, imports, and demand 

The EIA also estimates that US distillate production fell by 18,000 bpd (barrels per day) or 0.3% to 5.3 MMbpd (million barrels per day) on August 4–11, 2017. Production fell by 348,000 bpd or 7% from the same period in 2016.

US distillate imports rose by 126,000 bpd to 167,000 bpd on August 4–11, 2017. Imports rose by 75,000 bpd or 81.5% from the same period in 2016.

US distillate demand fell by 288,000 bpd to 4.2 MMbpd from August 4–11, 2017. Demand rose by 734,000 bpd or 21% from the same period in 2016.

Impact 

Inventories are below the five-year range. Inventories fell ~2% in the last ten weeks. An expectation of a fall in distillate inventories due to the summer would support diesel prices. As a result, it would support crude oil (IEZ) (USL) futures.

The EIA estimates that WTI and Brent crude oil prices will average $48.8 per barrel and $50.71 per barrel in 2017, respectively. Read Crude Oil: Price Forecasts and Hedge Funds’ Position for more information on crude oil price forecasts.

Read Will Global Oil Demand Overshadow Ample Supplies? and How Global Crude Oil Supplies Are Influencing Crude Oil Prices for more information.

Read US Natural Gas Futures Near 3-Week High: What’s Next? to learn more about natural gas.

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