Understanding Falling US Distillate Inventories
US distillate inventories
The EIA (US Energy Information Administration) estimates that US distillate inventories fell 0.8 MMbbls (million barrels) to 138.0 MMbbls from September 15–22, 2017. Inventories have fallen 25 MMbbls, or 15.4% YoY (year-over-year).
The market expected a draw in US distillate inventories by 2.1 MMbbls from September 15–22, 2017. US diesel futures rose 0.1% to $1.84 per gallon on September 27, 2017, and diesel and US crude oil (DBO) (USO) (DWT) prices rose on September 27, 2017, due to the fall in distillate inventories.
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US diesel prices are at the highest level since July 2015, and higher diesel prices have a positive impact on refiners (CRAK) like Western Refining (WNR) and Marathon Petroleum (MPC). Likewise, higher crude oil prices have a positive impact on the earnings of oil producers (XLE) (XOP) like Matador Resources (MTDR), Comstock Resources (CRK), and Continental Resources (CLR).
US distillate production, imports, and demand
The EIA estimates that US distillate production rose 96,000 bpd (barrels per day) to 4.6 MMbpd (million barrels per day) from September 15–22, 2017. But production fell 70,000 bpd, or 1.5% YoY.
US distillate imports fell 1,000 bpd to 84,000 bpd from September 15–22, 2017, and imports have fallen 60,000 bpd, or 42% YoY.
US distillate demand fell 518,000 bpd to 3.7 MMbpd from September 15–22, 2017, and demand has fallen 26,000 bpd, or 0.7% YoY.
US distillate inventories have fallen 11.5 MMbbls, or 7.7%, over the past ten weeks and have fallen for the fourth-straight week. A fall in distillate inventories could support diesel prices, and higher diesel prices are bullish for crude oil (DWT) (UWT) prices.
For crude oil price forecasts, check out Market Realist’s “Will Brent and US Crude Oil Prices Rise in 2018?” You might also be interested in the series Crude Oil Futures: Is It Time for a Correction? and Will the US Crude Oil Bull Market Be Short-Lived?
For updates on natural gas, read Market Realist’s series Why OPEC’s Meeting Is Important for Natural Gas Prices.