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How Gasoline Inventory Supported Crude Oil Prices

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Gasoline inventory 

The EIA (U.S. Energy Information Administration) reported that the US gasoline inventory fell by 2.2 MMbbls (million barrels) to 256.5 MMbbls for the week ending February 19, 2016. In contrast, the API (American Petroleum Institute) reported that the US gasoline inventory rose by 0.56 MMbbls for the same period.

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Gasoline inventory by region 

The gasoline inventory in the Gulf Coast region fell to 82.5 MMbbls from 85.5 MMbbls for the week ending February 19, 2016. This suggests an increase in demand or a fall in production. In contrast, the East Coast region saw its gasoline inventory rise to 72.5 MMbbls from 70.5 MMbbls during the same period. On the other hand, the gasoline inventory fell in the Midwest region to 59.9 MMbbls for the same period. The Gulf Coast, Midwest, and East Coast regions affect the overall gasoline inventory the most.

Impact 

Market surveys estimated that gasoline inventories would fall by 1 MMbbls for the week ending February 19, 2016. The larger-than-expected fall in gasoline inventories boosted gasoline and crude oil prices. Gasoline prices rose almost 9% in the last two trading sessions. US gasoline closed at $1.06 per gallon in yesterday’s trade.

Higher gasoline prices motivate refiners like Tesoro (TSO), Phillips 66 (PSX), Marathon Petroleum (MPC), Sunoco (SUN), and Western Refining (WNR) to produce more. As a result, crude oil prices rose for the second consecutive day. To learn more about refinery demand, read the ninth part of this series.

The record-high US crude oil and refined products inventories will continue to benefit oil storage and transportation companies like Williams Companies (WMB), Energy Transfer Partners (ETP), and DCP Midstream Partners (DPM).

ETFs such as the VanEck Vectors Oil Refiners ETF (CRAK), the United States Oil Fund (USO), the iShares U.S. Energy ETF (IYE), and the Direxion Daily Energy Bull 3X Shares ETF (ERX) are also influenced by the rises and falls of oil and gas prices.

In the next part of this series, we’ll look at gasoline supply and demand.

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