Crude Oil Continues to Rise as Inventories Drop at Cushing OK
Crude oil prices continue to move higher on Wednesday as a larger than expected inventory draw help keep the petroleum complex buoyed. Heating oil prices broke out and continue to trade at fresh 7-month highs. Crude prices topped $51 per barrel, as production in the continental U.S. continued to decline. Additionally, inventory levels for crude oil declined in Cushing OK, which kept upward pressure on the entire petroleum complex.
Imports were actually down but offset by a large increase in production in Alaska. According to the EIA, U.S. crude oil imports averaged 7.7 million barrels per day last week, down by 134,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.6 million barrels per day, 9.5% above the same four-week period last year.
Crude oil inventories declined by more than expected. The Energy Information Administration reported that U.S. commercial crude oil inventories decreased by 3.2 million barrels from the previous week. Gasoline inventories increased by 1.0 million barrels last week, while distillate fuel inventories increased by 1.8 million barrels.
Production in the U.S. actually increased for the first time in a few weeks, with Alaskan production rising 18K compared to a decline of 10K production in the continental U.S. This shows that shale franking producers have yet to come back into the market following the large decline that appears to have ended in February.
Demand remains strong for gasoline. Total products demand over the last four-week period averaged over 20.3 million barrels per day, up by 3.1% from the same period last year. Over the last four weeks, gasoline demand averaged over 9.6 million barrels per day, up by 2.6% from the same period last year. Distillate fuel demand averaged about 4.0 million barrels per day over the last four weeks, up by 0.4% from the same period last year.
The response from refiners given the increase in demand for gasoline seen as the calendar flipped into June has been to ramp up production. According to the Department of Energy, “U.S. crude oil refinery inputs averaged over 16.4 million barrels per day during the week ending June 3, 2016, 211,000 barrels per day more than the previous week’s average. Refineries operated at 90.9% of their operable capacity last week. Gasoline production increased last week, averaging over 10.1 million barrels per day. Distillate fuel production increased last week, averaging over 4.8 million barrels per day”.
Prices were helped by better than expected economic data from the world’s second largest economy. Chinese Trade data were better than expected as domestic demand showed that economy is gaining traction. China’s exports fell more than expected in May as global demand remained stubbornly weak, but imports beat forecasts, adding to hopes that the economy may be stabilizing. Exports fell 4.1% from a year earlier, according to the General Administration of Customs. Imports dropped 0.4% from a year earlier, the smallest decline since they turned negative in November 2014. That resulted in a trade surplus of $49.98 billion in May, versus forecasts of $58 billion and April’s $45.6 billion.