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Increased Refinery Activity Should Support Crude Oil Prices

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Refinery demand

Refineries are the main source of crude oil demand. Refinery input levels affect inventory draws and builds. So, refining throughputs affect inventory levels not only for crude oil, but also for refined products—like gasoline and distillates. We’ll discuss inventory levels for these products in the next parts of this series.

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Refinery input trends

US crude oil refinery inputs averaged 15.5 million barrels per day, or MMbbl/d, during the week ended March 20, increasing by 94,000 barrels per day, or bpd, compared to last week’s average.

The increase in crude oil demand from refineries also helped offset the inventory build to an extent.

The rise in refinery inputs signal the end of refineries’ seasonal maintenance, which had prepared for the summer driving season.

Demand for crude oil inputs is high during peak driving season, which is bullish for crude oil prices. In turn, prices are bullish for major oil producers like Oasis Petroleum (OAS), Continental Resources (CLR), Whiting Petroleum (WLL), and Cimarex Energy (XEC). All these companies are components of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and they make up ~5.5% of the ETF.

Operating capacity

Crude oil inputs increased refinery operating levels by 0.9 percentage points, to reach 89% of operable capacity, last week.

Analysts’ expectations called for a modest 0.1-percentage-point increase.

In the next part of this series, we’ll discuss how refinery capacity affected gasoline and distillate inventories last week.

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