By: Miles Pearson – Forex Focus
With summer drawing to a close, will the fall in inventories driving oil prices be stemmed?!
In the United States, commercial crude-oil, gasoline and distillate-fuel inventories fell more than expected in the week ending August 24, according to the US Energy Information Administration’s (EIA’s) weekly inventory report. Excluding the strategic petroleum reserves, crude-oil inventories dropped by 2.6 million barrels from the previous week. Domestic gasoline production, on the other hand, averaged 10.2 million barrels per day, higher than the previous week’s figures. While distillate-fuel production averaged 5.2 million barrels per day, down from the previous week. All of this in spite of refineries operating at 96.3 percent of their capacity.
Motor-gasoline inventories, meanwhile, slid by 1.6 million barrels; distillate-fuel inventories dropped by 0.8 million barrels; and inventories of blending components remained mostly unchanged from the previous week’s numbers. Crude-oil inventories are currently at a five-year average of 405.8 million barrels, motor-gasoline inventories are around 5 percent above the average and distillate-fuel inventories stand at about 8 percent below the average.
On the input front, crude-oil refinery inputs averaged 17.6 million barrels per day for the week ending August 24, down by 326,000 barrels per day when compared to a week earlier, with the four-week input average coming in at 17.76 million barrels per day (bpd).
On the production side, the four-week average for:
Motor gasoline was down to 10.13 million bpd from 10.19 million bpd the week before and 10.37 million bpd from the same time last year.
Distillate-fuel production rose slightly to 5.295 million bpd from 5.289 million bpd from a week back and 5.185 million bpd from the same time last year.
Also, according to the monthly report published at the end of August by the EIA, crude-oil production in the United States increased by 231,000 barrels per day to a record 10.7 million bpd in June.
Domestic supply of all products in the last four weeks averaged 21.2 million bpd, 0.2 percent lower than the previous week.
The breakdown of the four-week average of petroleum products supplied is highlighted below:
Motor gasoline: 9.6 million barrels per day, down 1.5 percent from the same time last year.
Distillate fuel: 4.1 million barrels per day, down 1.5 percent from the same time last year.
Jet fuel: Up 5.2 percent from the same time last year.
Imports of crude oil into the US averaged 7.5 million barrels per day during the most recent recorded week, down 33,000 bpd from the previous week, with the four-week average for imports coming in at 8.0 million bpd, 1.9 percent less compared to the same time last year, according to the EIA.
US crude-oil exports, meanwhile, have witnessed a steady rise over the last few years. Earlier, in May of this year, crude-oil exports from the US surged past the 2-million-bpd mark, setting a new record and following it up with another export figure of 2.2 million barrels per day in June, according to data published by the EIA.
US gasoline prices continue to hover near multi-year highs, with retail prices of regular gasoline holding near $2.83 per gallon, the highest since mid-2014 when prices were quoted at $3.45 per gallon. The rise in crude prices can be attributed to the cumulative miles driven, which according to the US Federal Highway Administration expanded to 5.2 billion miles in the first half of this year—a growth of 0.3 percent from a similar period last year, leading to upward pressure in motor-gasoline prices across the country.
Retail prices of gasoline vary across the US due to regional demand and supply balances. While retail prices are the lowest around the US Gulf Coast, which is home to about 50 percent of the refining capacity in the country—not to mention that the region consumes less than what is produced, on the West Coast retail gas prices are generally higher than the average prices in the US due to limited infrastructure to transport the oil, which is of a slightly higher specification and more expensive to produce.
According to the EIA, gasoline prices may have peaked in May of this year when retail prices were trading at $2.9 per gallon, and it expects average prices for this year and the next to hover around $2.76 per gallon. With the summer season in the US, which lasts from April to September, drawing to an end, so could the rise in domestic gasoline prices and the broader international crude-oil prices.
International prices of WTI (West Texas Intermediate) crude oil are currently oscillating around the $68-70 per-barrel mark, while Brent has been trading in the $75-78 per-barrel range for the last few days.