The role refineries played in petroleum inventories this week



Refinery demand

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 refined products like gasoline and distillates. We’ll discuss inventory levels for these products in the following parts.

US crude oil refinery inputs averaged 16.4 million bpd (barrels per day) during the week ended January 2. Inputs were up by 43,000 bpd compared to last week’s average.

Refinery input levels, which had remained comfortably over the 16 million bpd mark since July 2014, saw a dip during the refinery maintenance season. Now these levels are again over 16 million bpd (see the above graph).

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Operating capacity

The operating level last week was 93.9% of operable capacity. Higher operating capacity indicates higher utilization and higher inputs, which lead to a draw in inventories.

A decrease in crude inventories is bullish for crude prices and major oil producers such as Marathon Oil (MRO), Whiting Petroleum (WLL), Pioneer Natural Resources (PXD), and Hess Corporation (HES). These companies are components of the Energy Select Sector SPDR ETF (XLE).

Knock-on effects

Refineries’ elevated input demands averaging more than 16 million barrels per day for the last couple of weeks has resulted in strong supplies of refined products.

Andy Lipow, president of Lipow Oil Associates, a Houston-based consulting firm, said, “Refineries are continuing to turn the crude-oil surplus into a petroleum-product surplus. . . . They’re hoping that the demand materializes.”

Continue to the following part of this series to read about two important refined products.


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