How US Distillate Inventories Affect Diesel and Oil Prices

The EIA (U.S. Energy Information Administration) reported that US distillate inventories fell by 2.2 MMbbls (million barrels) to 150.2 MMbbls between March 31 and April 7, 2017. Surveys estimated that US distillate inventories would fall by 0.88 MMbbls between March 31 and April 7, 2017.

US distillate inventories fell for the ninth straight week. Diesel futures contracts for May delivery fell 0.1% to $1.65 per gallon on April 12, 2017. Prices fell despite the fall in distillate inventories. Crude oil (DIG) (USO) (FXN) and diesel futures moved together on April 12, 2017. Diesel prices usually move together with crude oil prices, as shown in the following chart. Volatility in crude oil and diesel fuel prices impact the earnings of US refiners and crude oil producers like Marathon Petroleum (MPC), Western Refining (WNR), Tesoro (TSO), Matador Resources (MTDR), and Cobalt International Energy (CIE). For more on crude oil prices, read part one of this series.

US distillate production rose by 93,000 bpd (barrels per day) to 5,060,000 bpd between March 31 and April 7, 2017. US distillate imports fell by 13,000 bpd to 118,000 bpd for the same period. Weekly distillate demand rose by 537,000 bpd to 4,635,000 bpd during the same period.

US distillate inventories hit 170.7 MMbbls in the week ending February 3, 2017, the highest level since 2010. Since then, they have fallen ~13%. Falling distillate inventories are bullish for diesel prices. A rise in diesel prices is bullish for crude oil prices.

Read What Can Investors Expect in the Crude Oil Market in 2017 and Russia, Libya, and Syria Impact Crude Oil Prices for more information.

Read Will Crude Oil Prices Test 3 Digits Again? for more on crude oil price forecasts.

For related analysis, visit Market Realist’s Energy and Power page.