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Relationship between US Distillate Inventories and Oil Prices

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US distillate inventories 

US distillate inventories rose by 2,747,000 barrels to 127.7 MMbbls (million barrels) on November 17–24, 2017. Inventories rose 2.2% week-over-week but fell by 26.4 MMbbls or 17.1% year-over-year.

The market expected that US distillate inventories would have risen 0.2 MMbbls on November 17–24, 2017. A larger-than-expected rise in distillate inventories pressured US diesel and crude oil (UWT) (DBO) futures on November 29, 2017. US diesel futures fell 1.5% to $1.92 per gallon fell on the same day.

Lower oil (DWT) (UCO) prices have a negative impact on oil producers’ (IXC) (IEO) earnings like Chevron (CVX), Northern Oil & Gas (NOG), and Matador Resources (MTDR).

Lower diesel prices have a negative impact on refiners (CRAK) like Western Refining (WNR), Alon USA Energy (ALJ), and Phillips 66 (PSX).

US distillate production and demand  

US distillate production rose by 51,000 bpd (barrels per day) to 5.2 MMbpd (million barrels per day) on November 17–24, 2017, according to the EIA. Production fell 1% week-over-week but rose by 68,000 bpd or 1.3% YoY.

US distillate demand fell by 175,000 bpd to 3.8 MMbpd on November 17–24, 2017. Demand fell 4.3% week-over-week but rose by 41,000 bpd or 1.1% YoY.

Impact 

US distillate inventories have fallen by ~43.3 MMbbls or ~25% from their all-time high. Any fall in distillate inventories is bullish for diesel and oil (DWT) prices.

For updates on oil and gas, read Risks in the US Natural Gas Market Next Week and Russia and Hedge Funds Could Impact the Crude Oil Market.

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