Analysis by Dr. Nancy Yamaguchi

 

West Texas Intermediate (WTI) crude oil prices have maintained their strength, and they are in the $48.50 per barrel (/b) neighborhood this morning. Prices hit an eight-week high, propelled by a bullish set of weekly supply data released yesterday by the Energy Information Administration (EIA), which covered the week ended July 21. The upward price movement now appears to have reached a plateau in early trading.

 

The market had been anticipating a drawdown of crude oil and distillate inventories, though there was disagreement on the direction of gasoline inventories. The EIA data showed across-the-board drawdowns: 7.208 million barrels (MMbbls) of crude, 1.015 MMbbls of gasoline and 1.852 MMbbls of distillate. The net drawdown was 10.075 MMbbls.

 

On Monday, the DTN industry survey predicted a stock drawdown of 2.7 MMbbls of crude, 1.2 MMbbls of gasoline and 2.5 mmbbls of diesel. The American Petroleum Institute (API) later reported a massive 10.2-MMbbl drawdown of crude stockpiles, plus a small draw of 0.11 MMbbls of distillate. API reported an addition to gasoline inventories of 1.9 MMbbls.

 

The EIA data surpassed these industry expectations. As of the week ended July 21, U.S crude inventories (excluding the Strategic Petroleum Reserve [SPR]), stood at 483.4 MMbbls. This was essentially back to where the stockpile stood at the beginning of the year, 483.1 MMbbls for the week ended January 6. In the intervening months, inventories continued to grow, peaking at a massive 535.5 MMbbls during the last week of March. Since then, crude inventories have been reduced by over 52 MMbbls.

 

The EIA also reported a 19-thousand-barrel-per-day (kbpd) decline in U.S. crude production, showing production of 9,410 kbpd relative to 9,429 kbpd during the week ended July 14. The crude balance was also shifted into deficit when crude exports increased to 1,030 kbpd and crude imports increased by only 48 kbpd for the week. Net crude inputs to refining rose by 166 kbpd.

 

Apparent demand for gasoline rose by 229 kbpd during the week, bringing average consumption to a very high 9,821 kbpd. Diesel demand rose by 42 kbpd during the week, rising to 4,376 kbpd.

 

WTI crude opened at $48.70/b this morning, up by 19 cents, or 0.39%, from yesterday’s opening value. Prices are $48.49/b currently, down by 21 cents from today’s opening price.

 

Diesel opened this morning at $1.5942/gallon, up by 1.66 cents, or 1.05%, from yesterday’s opening. Diesel prices are $1.5936/gallon currently, down slightly by 0.06 cents from today’s opening price.

 

Gasoline opened today at $1.6161/gallon, an increase of 1.66 cents, or 1.04%, from yesterday’s opening. Gasoline prices are $1.621/gallon currently, up by 0.49 cents from today’s opening.