US crude oil inventories
According to data released on March 3, 2016, US crude oil inventories rose 2.0% in the week ended February 26, 2016. The US refinery utilization rate rose to 88.3% from 87.3% in the previous week.
The refinery utilization rate is the gross input divided by refineries’ operable refining capacities. US crude oil inventories have risen significantly since mid-2014.
US crude oil production
US crude oil production fell 0.3% in the week ended February 26. The above graph shows the weekly supply and demand for crude oil in the United States over the six-week period ended February 26.
US crude oil imports
US crude oil imports rose 6.3% in the week ended February 26. Imports fell 1.5% in the week ended February 19. With increased domestic production, imports fell over time to keep the US crude oil supply relatively stable.
US refinery inputs
For the week ended February 26, US crude oil refinery inputs were 15.9 MMbpd (million barrels per day). The inputs to US refineries were less than the total crude oil production and imports. This might contribute to a rise in crude oil inventories. Crude oil supply and demand dynamics drive crude oil prices.
US crude oil exports
According to a study by the EIA (U.S. Energy Information Administration), if the projected crude oil production remains below 10.6 MMbpd over the next decade, lifting a ban on US crude oil exports may not make a major difference in crude oil prices.
However, the study shows that if domestic production in 2025 ranges between 11.7 MMbpd and 13.6 MMbpd, lifting the ban might result in increased domestic production, higher crude oil exports, reduced product exports, and slightly lower gasoline prices in the United States.
On December 30, 2015, NuStar Energy (NS) and ConocoPhillips (COP) announced the loading of their first export cargoes of light crude oil since the export ban was lifted. NuStar Energy forms 0.62% of the Multi-Asset Diversified Income ETF (MDIV).
Impact on MLPs
Lifting the ban on US crude oil exports could narrow the spread between WTI (West Texas Intermediate) and Brent crude oil prices. We’ll analyze this spread in the next part of this series. Narrowing of the WTI-Brent spread could benefit upstream MLPs such as Memorial Production Partners (MEMP) and Vanguard Natural Resources (VNR). At the same time, the EIA expects refining companies’ margins to be lower as the WTI-Brent spread narrows.