Why the fall in crude inventories was less than expected

EIA inventory data

On September 4, the U.S. Energy Information Administration (or EIA) released inventory data for the week ended August 29.

Crude inventories dropped by 905,000 MMBbls, versus analysts’ expectations of a ~1 MMBbls drop.

The total U.S. commercial-crude inventory now stands at 359.6 million barrels and remains in the upper half of the five-year range for this time of year.

Refinery demand

Crude draws and gains are affected by refinery input levels. For the past few weeks, refineries had been operating at high levels in anticipation of the Labor Day holiday weekend, when U.S. motorists increased their gasoline demand.

Anticipating a boost in gasoline demand, refineries increased their crude input demand.

Seasonal maintenance

Now that the summer driving season is behind us, inventories are likely to increase in the coming months as refineries plan seasonal maintenances, which will reduce crude demand. This could pressure WTI crude prices lower. We’ll cover the implied effect on crude prices in a later part of this series.

Key stocks and ETFs

When WTI prices are pressured, oil-producing companies like Hess Corp. (HES), ExxonMobil (XOM), ConocoPhillips (COP), and Chevron Corp. (CVX) might see their margins take a hit. All these companies are components of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Refineries

The following part of this series covers refinery activity last week.