US distillate inventories 

The EIA (U.S. Energy Information Administration) reported that US distillate inventories fell by 3.7 MMbbls (million barrels) to 157 MMbbls between September 30 and October 7. US distillate inventories fell for the third straight week from their six-year seasonal highs.

A Reuters survey had estimated that distillate inventories would fall by 1.6 MMbbls for the same period. Diesel futures rose due to a larger-than-expected fall in distillate inventories on October 13, 2016. For more on diesel futures, read Part 10 of this series. US distillate inventories are 6.4% higher than in the same period in 2015. They’re also above their upper range for the last five years.

US Distillate Inventories Fall from a 6-Year Seasonal High

Distillate production and demand 

US distillate production fell by 217,000 bpd (barrels per day) to 4,496,000 bpd between September 30 and October 7. US distillate imports fell by 8,000 bpd to 95,000 bpd for the same period. Weekly distillate demand rose by 391,000 bpd to 4,266,000 bpd for the same period.

Impact on stocks and ETFs

High distillate inventories could pressure diesel fuel and heating oil prices. For more on diesel prices, read Part 10 of this series.

Lower diesel fuel prices can have a negative impact on the earnings of US refiners and crude oil producers like Valero Energy (VLO), Tesoro (TSO), Northern Tier Energy (NTI), Goodrich Petroleum (GDP), and Synergy Resources (SYRG).

Volatility in oil and refined products prices affect funds such as the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the DB Crude Oil Double Short ETN (DTO), the Direxion Daily Energy Bear 3x (ERY), the iShares Global Energy ETF (IXC), the United States Gasoline Fund (UGA), and the VelocityShares 3x Long Crude Oil ETN (UWTI).

See Saudi Arabia: Weather Will Be a Key Demand Driver of Oil in 2H16 and India’s Crude Oil Imports Hit a 7-Year High for more on crude oil.

See Major Banks Downgrade Crude Oil Prices despite OPEC’s Deal and Will Crude Oil Prices Test 3 Digits Again? to learn about crude oil price forecasts.

For ongoing analysis, visit Market Realist’s Upstream Oil and Gas page.

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