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Refinery Inputs Increase: Is It Bullish or Bearish for Crude Oil?

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Refinery input trends

In its weekly report on May 20, the EIA (U.S. Energy Information Administration) reported that US crude oil refinery inputs averaged over 16.2 MMbpd (million barrels per day) during the week ending May 15. This was an increase of 245,000 bpd (barrels per day) compared to the previous week’s average.

An increase in demand for inputs is bullish for crude prices. In turn, it’s positive for major oil producers like Chevron (CVX), Apache (APA), Cimarex Energy (XEC), and ConocoPhillips (COP). All of these companies are part of the iShares U.S. Energy ETF (IYE). They account for 19% of IYE.

An increase in refinery inputs, or demand, in conjunction with a drop in production, or supply, makes for very bullish sentiment in the crude oil market. In the previous week, the market shrugged off the decline in inventories because refining inputs also declined.

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Operating capacity

Last week’s rise in crude inputs increased refinery operating levels by 1.2% to touch 92.4% of operable capacity—compared to 91.2% the previous week. Analysts were expecting an increase of just 0.08%.

Refinery demand

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

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