Crude Oil Rebound despite Mixed EIA Data

by ETF Base on July 24, 2016

Screen Shot 2016-07-24 at 9.23.09 PMCrude oil prices rebounded from their lows on Wednesday despite a mixed inventory report from the Department of energy that showed a larger than expected build in gasoline inventories. Crude oil inventories appear to have been reported in line with expectations while distillates where a non-event. Imports continued to replace U.S. production placing a floor under crude oil inventories which continue to decline at a modest pace.  Domestic production actually increased with all the increases coming from production out of Alaska.

The EIA reported that U.S. crude oil imports averaged over 8.1 million barrels per day last week, up by 293,000 barrels per day from the previous week. Over the last month, crude oil imports averaged 8.0 million barrels per day, nearly 6% higher on a year over year basis.

The increase in inventories help reduce the draw in crude oil stocks. The Energy Information Administration reported on the July 20th that U.S. commercial crude oil inventories decreased by 2.3 million barrels, which was largely expected.  Crude oil inventories remain at record highs for this time of year. Gasoline inventories increased by 0.9 million barrels last week, and are at the upper end of the average range, while distillate fuel inventories decreased by 0.2 million barrels. Total commercial petroleum inventories increased by 2.6 million barrels last week.

Screen Shot 2016-07-24 at 9.23.17 PMDemand for petroleum products remains strong.  The EIA reported that total products demand over the last four-week period averaged over 20.3 million barrels per day, up by 1.8% from the same period last year. Over the last month, gasoline demand averaged over 9.7 million barrels per day, up by 1.3% from the same period last year. Distillate fuel demand averaged about 3.8 million barrels per day over the last four weeks, down by 0.7% from the same period last year. Jet fuel demand is up 8.5% compared to the same four-week period last year.

The data released by the Department of Energy was largely in line with the data released by the American Petroleum Institute on Tuesday evening. The API reported that inventories declined by 2.3 million barrels, for the week ending on July 15th, which was in line with expectation.

Traders will now eye the Baker Hughes rig count.  Over the past two weeks, the oil service giant has been reporting that active drilling rigs have been increasing which would lead one to believe that production would also be increasing.  If U.S. production increases while imports remain robust prices will likely have nowhere to go but lower.

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