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How Long Will the Gasoline Inventory Impact Crude Oil Prices?

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Sep. 24 2015, Published 12:02 p.m. ET

EIA crude oil inventory report 

The EIA (U.S. Energy Information Administration) published the weekly US commercial crude oil inventory report on September 23, 2015. It reported that the crude oil stocks fell by 1.9 MMbbls (million barrels) to 454 MMbbls for the week ending September 18, 2015. Likewise, the crude oil stockpile fell by 2.1 MMbbls to 455.9 MMbbls for the week ending September 11, 2015. The US crude oil stocks fell for the second consecutive week.

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Inventory estimates and impact  

Market surveys from Bloomberg estimated that crude oil stocks could fall by 1.65 MMbbls for the week ending September 18, 2015. However, the larger-than-expected inventory fall didn’t support the crude oil prices. In contrast, industry surveys estimated that gasoline could rise by 1 MMbbls (million barrels) for the same period. However, the gasoline stockpile rose by 1.4 MMbbls for the same period.

The larger-than-expected gasoline inventory weighed on the crude oil prices. A rise in refined products’ inventory means that crude oil demand could fall because they’re the inputs to refineries. The rise in the gasoline buildup was due to the outage in the gasoline pipeline with capacity of 850,000 barrels in Linden.

The crude oil input to refineries fell by 310,000 bpd (barrels per day) to 16.2 MMbpd (million barrels per day) for the week ending September 18, 2015—compared to the previous week. Crude oil refineries operated at 90.90% of their operable capacity over the same period. The slowing refinery demand will also slow down the demand for crude oil and put pressure on crude oil prices.

The falling crude oil prices impact oil and gas producers like ExxonMobil (XOM), Occidental Petroleum (OXY), and Hess (HES). Combined, they account for 21.35% of the Energy Select Sector SPDR ETF (XLE). These stocks’ crude oil production mix is more than 49% of their total production. Oil and gas ETFs like XLE and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) are also affected by the falling crude oil prices.

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