US distillate inventories
The EIA (U.S. Energy Information Administration) reported that US distillate inventories fell by 0.6 MMbbls (million barrels) to 150.4 MMbbls on April 21–28, 2017. Surveys estimated that US distillate inventories would have risen by 0.7 MMbbls for the same period. US distillate inventories fell for the ninth time in ten weeks.
June diesel futures contracts rose 0.7% to $1.47 per gallon on May 3, 2017. Prices rose due to the fall in distillate inventories. Crude oil (FENY) (DTO) (PXI) (XES) and diesel futures moved together on May 3, 2017.
Diesel prices usually move together with crude oil prices, as shown in the following chart. Volatility in crude oil and diesel fuel prices impacts US refiners and crude oil producers’ earnings like Marathon Petroleum (MPC), Phillips 66 (PSX), SM Energy (SM), and Sanchez Energy (SN). For more on crude oil prices, read Part 1 of this series.
Distillate production and demand
US distillate production rose by 38,000 bpd (barrels per day) to 5,101,000 bpd on April 21–28, 2017. US distillate imports rose by 58,000 bpd to 112,000 bpd for the same period. Weekly distillate demand rose by 589,000 bpd to 4,256,000 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 ~12%. Falling distillate inventories are bullish for diesel prices. A rise in diesel prices is bullish for crude oil prices.
For more on crude oil prices, read What Can Investors Expect in the Crude Oil Market in 2017? and Why OPEC Needs to Extend Production Cut Deal beyond 2017.
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.