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Gasoline and Distillate Inventory Estimates Imply Market Carnage

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EIA gasoline and distillate inventory 

The EIA (U.S. Energy Information Administration) reported that gasoline stocks rose by 0.9 MMbbls (million barrels) to 221.4 MMbbls for the week ending December 25, 2015. Similarly, distillate stocks rose by 1.8 MMbbls to 153.1 MMbbls for the same period. The API (American Petroleum Institute) published its weekly crude oil, gasoline, and distillate inventory report on January 5, 2016. The report stated that gasoline and distillate inventories had risen by 7.1 MMbbls and 5.6 MMbbls, respectively, for the week ended January 1, 2016. To know more about crude oil inventory, visit the previous part of the series.

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Gasoline and distillate inventory estimates

Industry surveys estimate that gasoline and distillate stocks would rise by 2 MMbbls for the week ending January 1, 2016. The forecast of rising refined products inventory suggests weak demand or more supplies. The weak demand may be due to the weak seasonal demand. The rise in the production of refined products might have also led to the increase in supplies. A higher crack spread and lower oil prices would have motivated refiners to produce more gasoline and distillates.

Genscape states that the crude oil stocks at Cushing, Oklahoma, rose by 0.5 MMbbls for the week ending January 1, 2016. The rise may have been due to the floods in the Midwest that closed pipelines. The rising stocks at Cushing could also drag oil prices lower as it’s the largest storage hub of the United States.

Impact 

The consensus of rising inventories of gasoline and distillate stocks could push crude oil prices lower. Lower oil prices also benefit refiners like Western Refining (WNR), Alon (ALDW), CVR Refining (CVRR), and Northern Tier Energy (NTI). In contrast, rising oil prices support oil producers like ExxonMobil (XOM), Chevron (CVX) and Occidental (OXY).

The volatility in the oil and gas market affects ETFs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Vanguard Energy ETF (VDE), and the First Trust Energy AlphaDEX Fund (FXN).

Read the next part of the series to know more about the latest OPEC production updates.

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