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Larger Build in US Gasoline Inventories Pressures Oil Prices

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Weekly US gasoline inventories  

According to the EIA, US gasoline inventories increased by 3.4 MMbbls (million barrels) to 245.4 MMbbls on January 26–February 2, 2018. However, inventories dropped by 10 MMbbls or 4.2% from a year ago.

Analysts estimated that US gasoline inventories could have increased by 0.5 MMbbls on January 26–February 2, 2018. The larger-than-expected rise in gasoline inventories pressured US crude oil and gasoline futures on February 7, 2018.

March US gasoline futures decreased 2.1% to $1.76 per gallon on February 7, 2018. The United States Gasoline ETF (UGA) follows gasoline futures. UGA fell 2.6% to 31.1 on February 7, 2018.

March US crude oil futures fell 2.5% to $61.79 per barrel on February 7, 2018. The United States Oil ETF (USO) follows crude oil futures. USO fell 2.6% to 12.3 on February 7, 2018. Lower oil prices have a negative impact on the Energy Select Sector SPDR ETF (XLE). XLE fell 1.6% to 68.7 on February 7, 2018. XLE has exposure to oil and gas companies.

US gasoline production and demand  

US gasoline production increased by 518,000 bpd (barrels per day) or 5.4% to 10,085,000 bpd on January 26–February 2, 2018. Production increased by 281,000 bpd or 2.8% YoY (year-over-year).

US gasoline demand increased by 66,000 bpd to 9,110,000 bpd on January 26–February 2, 2018. The demand increased by 169,000 bpd or 1.8% YoY. The increase in gasoline demand is bullish for gasoline and oil prices.

Higher gasoline prices relative to crude oil prices benefit the VanEck Vectors Oil Refiners ETF (CRAK). CRAK has exposure to refining companies. CRAK fell 0.5% to 29.6 on February 7, 2018.

Impact 

US gasoline inventories are ~0.5% above their five-year average, which is bearish for gasoline and oil prices. If inventories drop below the five-year average, it’s a bullish sign for gasoline and oil prices.

Next, we’ll discuss US distillate inventories.

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