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Gasoline and Distillate Inventories Could Add Fuel to the Fire

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Jan. 21 2016, Updated 7:58 a.m. ET

API gasoline and distillate inventories 

In the previous part of this series, we covered how the crude oil inventory report could cause collateral damage in crude oil prices. Now let’s explore how gasoline and distillate inventories affect crude oil prices. The API’s (American Petroleum Institute) weekly crude oil inventory report was released yesterday and stated that gasoline and distillate inventories rose by 4.7 MMbbls (million barrels) and 1.5 MMbbls, respectively, for the week ending January 15, 2016.

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EIA gasoline and distillate inventories and estimates 

Last week, the EIA (U.S. Energy Information Administration) stated that the gasoline inventory had risen by 8.4 MMbbls to 240.4 MMbbls for the week ending January 8, 2016. Likewise, the distillate inventory had risen by 6.1 MMbbls to 165.6 MMbbls for the same period. Market surveys estimate that gasoline and distillate inventories may have risen by 1.4 MMbbls and 1.3 MMbbls, respectively, for the week ending January 15.

Yesterday’s API report showed a greater-than-expected rise in gasoline and distillate inventories for the same period. The EIA inventory report is scheduled for release today. A greater-than-expected rise in gasoline and distillate inventories could add pressure to the depressed oil market. Crude oil prices could test fresh lows as covered in the first part of this series.

The gasoline and distillate inventories may have increased due to weak retail demand. The lower retail demand affects the profitability of oil refiners like Tesoro (TSO), Valero Energy (VLO), and Phillips 66 (PSX). Lower retail demand, refinery demand, and oil prices will put pressure on the sustainability of oil producers like Murphy Oil (MUR), ConocoPhillips (COP), and Pioneer Natural Resources (PXD). 

The ups and downs in the oil market affect ETFs like the United States Oil Fund (USO), the ProShares Ultra Bloomberg Crude Oil ETF (UCO), the Vanguard Energy ETF (VDE), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).

Read the next part of this series to learn about the CFTC’s (U.S. Commodity Futures Trading Commission) COT (Commitment of Traders) report.

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