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US Distillate Inventories: Bullish for Diesel and Oil Prices?

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US distillate inventories  

The EIA (U.S. Energy Information Administration) reported that US distillate inventories fell by 0.5 MMbbls (million barrels) to 152.4 MMbbls from March 24–31, 2017. Surveys estimated that US distillate inventories would have fallen by 1.1 MMbbls from March 24–31, 2017.

US distillate inventories fell for the eighth straight week. Diesel futures contracts for May delivery rose 0.7% to $1.6 per gallon on April 5, 2017. A fall in distillate inventories supported diesel futures. Crude oil (XOP) (UCO) (FENY) and diesel futures moved together on April 5, 2017. Diesel prices usually move together with crude oil prices, as shown in the following chart. Moves in crude oil and diesel fuel prices impact US refiners and crude oil producers’ earnings like Tesoro (TSO), Western Refining (WNR), Marathon Petroleum (MPC), QEP Resources (QEP), and Synergy Resources (SYRG). For more on crude oil prices, read Part 1 of this series.

Distillate production and demand  

US distillate production rose by 95,000 bpd (barrels per day) to 4,967,000 bpd from March 24–31, 2017. US distillate imports rose by 16,000 bpd to 131,000 bpd for the same period. Weekly distillate demand fell by 124,000 bpd to 4,098,000 bpd during the same period.

Impact  

US distillate inventories hit 170.7 MMbbls in the week ending February 3, 2017—the highest level since 2010. Since then, they fell 11%. 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 What to Expect from Crude Oil Prices in 2Q17 for more on crude oil prices.

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.

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