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Did the Distillate Inventory Diverge from Crude Oil Prices?

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Distillate inventory 

On February 23, 2016, the API (American Petroleum Institute) reported that the US distillate inventory fell by 0.26 MMbbls (million barrels) for the week ending February 19, 2016. Likewise, on February 24, 2016, the EIA (U.S. Energy Information Administration) reported that the US distillate inventory fell by 1.7 MMbbls to 160.7 MMbbls for the same period. The fall in the distillate inventory suggests a rise in distillate demand or a decrease in distillate supplies.

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Distillate inventory by region

Distillate inventories fell marginally from 49.6 MMbbls to 48.6 MMbbls in the Gulf Coast region for the week ending February 19, 2016. Likewise, the distillate inventory fell from 60.2 MMbbls to 59.9 MMbbls in the East Coast region for the same period. Distillate inventories also fell in the Midwest and Rocky Mountain regions. The Gulf Coast, Midwest, and East Coast regions contribute the most to the overall distillate inventory in the United States.

Impact

Market surveys estimated that the distillate inventory would fall by 0.71 MMbbls for the week ending February 19, 2016. The larger-than-expected decline in the distillate inventory supported crude oil prices as distillates are the refined form of crude oil. The fall in refined product inventories supports oil producers such as Anadarko Petroleum (APC), Statoil (STO), and Halcón Resources (HK). On the other hand, the record-high crude oil inventory supports oil and gas storage and transportation companies such as Williams Companies (WMB), Spectra Energy (SE), and ONEOK (OKE).

ETFs such as the VanEck Vectors Global Oil Refiners ETF (CRAK), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), and the Direxion Daily Energy Bull 3X Shares ETF (ERX) are also influenced by the volatility in the oil and gas market.

Read the next part of this series to learn why distillate inventories fell.

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