Now that the summer is in the rear view mirror it is clear that commodity trading volatility has picked up generating whipsaw price action for the oil market. Last week, both the API and the Department of Energy reported a larger than expected draw in crude oil inventories, which was written off by many analysts as an aberration, as supply disruptions during Hurricane Hermine, hampered delivery. Most were pointing to a rebound in crude oil stocks this week, which did not come to fruition. Stocks could continue to increase as the summer driving season winds down.
It appears that demand might be picking up as imports increased over the past week. Production also increased by 30K barrels per day, with most of the increase coming in Alaska. Production increases will likely continue if the increase in active drilling rigs continues per recent report from the oil service giant Baker Hughes.
Imports surged according to the Department of Energy. U.S. crude oil imports averaged about 8.1 million barrels per day last week, up by 993,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.2 million barrels per day, 10.1% above the same four-week period last year.
While expectations were for a 4-million-barrel build, the Energy Information Administration reported a draw. According to the EAI, U.S. commercial crude oil inventories decreased by 0.6 million barrels from the previous week. The EIA reported that gasoline inventories increased by 0.6 million barrels last week, and are well above the upper limit of the average range. Distillate fuel inventories increased by 4.6 million barrels last week and as we move into the heating season, it is clear that inventories are a robust level. Total commercial petroleum inventories increased by 6.0 million barrels last week.
Despite the increase in imports and product, demand remains robust. The EIA estimate that total products demand over the last four-week period averaged 20.6 million barrels per day, up by 5.7% from the same period last year. Over the last four weeks, gasoline demand averaged over 9.5 million barrels per day, up by 4.2% from the same period last year. Distillate fuel demand averaged over 3.6 million barrels per day over the last four weeks, up by 1.3% from the same period last year. Jet fuel demand is up 2.7% compared to the same four-week period last year.
Despite the robust increase in distillates, it appears that the end of the summer driving season in the United has reduced refinery runs. The Energy Information Administration reported that U.S. crude oil refinery inputs averaged over 16.7 million barrels per day during the week ending September 9, 2016, 200,000 barrels per day lower on a week over week basis. Refineries operated at 92.9% of their operable capacity last week. Gasoline production decreased last week, averaging 9.9 million barrels per day. Distillate fuel production decreased last week, averaging over 4.9 million barrels per day.
Petroleum Demand Offsets Increasing Supplies
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