US distillate inventories
The EIA (U.S. Energy Information Administration) reported that US distillate inventories rose by 1.6 MMbbls (million barrels) to 170.7 MMbbls between January 20 and January 27, 2017. This reading was the highest level since 2010. Surveys had estimated that US distillate inventories would fall by 0.9 MMbbls between January 20 and January 27, 2017. March diesel futures rose 2.7% to $1.67 per gallon on February 1, 2017, despite the unexpected rise in US distillate inventories.
Bullish momentum in crude oil (RYE) (FXN) (USL) (ERX) prices supported diesel prices. The roller coaster ride in crude oil and diesel fuel prices impacts the earnings of US refiners and crude oil producers like Phillips 66 (PSX), Valero Energy (VLO), QEP Resources (QEP), and Synergy Resources (SYRG). For more on crude oil prices, read part one of this series.
Distillate consists of diesel fuel and heating oil. The EIA reported that US residential heating oil prices were almost flat at $2.63 per gallon for the week ending January 30, 2017, compared to January 23, 2017.
Distillate production and demand
US distillate production rose by 102,000 bpd (barrels per day) to 4,677,000 bpd between January 20 and January 27, 2017. US distillate imports rose by 77,000 bpd to 236,000 bpd for the same period. Weekly distillate demand rose by 164,000 bpd to 3,809,000 bpd for the same period.
US distillate inventories are 6.8% more than they were in the same period in 2016. They’re also above their five-year range. High distillate inventories could pressure diesel fuel, heating oil, and crude oil prices.
For more on crude oil prices, read OPEC, Russia, and the US Will Impact Crude Oil in 2017, What Can Investors Expect in the Crude Oil Market in 2017, and US Election: How Will It Impact the Stock and Energy Markets.
Read Will Crude Oil Prices Test 3 Digits Again and Why Major Banks Upgraded Crude Oil Price Forecasts for more on crude oil price forecasts.
For energy-related analysis, visit Market Realist’s Energy and Power page.