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US Gasoline Inventories Could Threaten Crude Oil Prices

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Weekly US gasoline inventories   

According to the EIA, US gasoline inventories increased by 3.1 MMbbls (million barrels) to 244 MMbbls on January 12–19, 2018. Inventories increased 1.3% week-over-week but declined by 9.2 MMbbls or 3.6% YoY (year-over-year).

Analysts estimated that US gasoline inventories would have increased by 2.5 MMbbls on January 12–19, 2018. Gasoline futures rose 0.4% to $1.91 per gallon on January 24, 2018. US crude oil (DWT) (USO) and gasoline futures (UGA) moved together on the same day.

US crude oil (UWT) (UCO) prices are at a three-year high, which favors energy companies (RYE) (PXI) like SM Energy (SM), Hess (HES), Schlumberger (SLB), and Laredo Petroleum (LPI).

US gasoline (UGA) prices are near a three-year high, which favors US refining (CRAK) companies like Holly Frontier (HFC), Marathon Petroleum (MPC), and Valero (VLO).

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US gasoline production and demand   

US gasoline production decreased by 352,000 bpd (barrels per day) to 9,358,000 bpd on January 12–19, 2018, according to the EIA. Production decreased 3.6% week-over-week but increased by 533,000 bpd or 6% YoY (year-over-year).

US gasoline demand increased by 29,000 bpd to 8,697,000 bpd on January 12–19, 2018. The demand increased by 658,000 bpd or 8.2% YoY. The increase in gasoline demand is bullish for gasoline and oil (USO) prices.

Impact  

US gasoline inventories increased for the eleventh consecutive week. Inventories increased by 34.5 MMbbls or 16.5% during this period. If the momentum continues in 2018, it could pressure gasoline (UGA) and oil (UCO) prices.

US gasoline inventories are ~0.8% above their five-year average. If the difference rises, it’s a bearish sign for gasoline and oil (SCO) prices.

Next, we’ll discuss US distillate inventories.

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