Refinery inputs affect crude inventories
Refining input is the main source of demand for crude oil. So, refining throughputs affect inventory levels not just for crude oil, but also for its refined products like gasoline and distillates. We’ll discuss inventory levels for these products later in this series.
US crude oil refinery inputs averaged 16.6 million bpd (barrels per day) during the week ended December 5. High levels like these were seen earlier this year, in July.
In line with the seasonal trend that the US witnesses every year, refineries saw strong activity last week, and inputs were 271,000 bpd higher than the week prior. Refinery activity dips after the summer when the maintenance season starts, and then ramps up again as the US heads into winter.
Operating levels last week increased by 2% to 95.4% of operable capacity. Analysts had expected operating levels to remain flat.
Refinery activity fails to make a dent on crude inventories
Despite the higher demand by refiners, a massive increase in imports offset the impact of what could have been an inventory dip. Read Part 2 for more on U.S. Energy Information Administration’s crude inventory report.
An increase in crude inventories is bearish for crude prices and for major oil producers such as Marathon Oil Corporation (MRO), Occidental Petroleum Corporation (OXY), Pioneer Natural Resources (PXD), and Apache Corp. (APA).
Most of these companies are components of the Energy Select Sector SPDR ETF (XLE).
In the next part of this series, you’ll read about changes in gasoline inventories last week.