Saturday, December 07, 2019

Crude Slips Despite Robust Inventory Draws

by Editor (editor), , August 24, 2017

Over the last four weeks, crude oil imports averaged over 8.0 million barrels per day, down 5% on a year over year basis.

Crude oil prices were unable to gain traction despite robust fundamental news that saw crude oil inventories decline more than expected. Both the American Petroleum Institute and the Energy Information Administration reported unexpectedly large declines in stocks. Demand continues to remain robust, especially for distillate such as diesel and heating oil. While it appears that the Saudi plan to reduce exports to the United States, the fundamental are having a difficult time lifting crude oil prices.

On Tuesday, the American Petroleum Institute reported that U.S. crude inventories declined by 9.2 million barrels in the latest week much larger than the average forecast which was for a 3.1-million-barrel decline.

On Wednesday, the Department of Energy revealed that U.S. crude oil imports averaged over 8.1 million barrels per day last week, up by 364,000 barrels per day from the previous week. While imports increased on a week over week basis, they are down year over year. Over the last four weeks, crude oil imports averaged over 8.0 million barrels per day, down 5% on a year over year basis.

Inventories Declined More than Expected

Despite the rise in imports, refiners continue to generate product, which led to a large decline in crude oil stocks. According to the EIA, U.S. commercial crude oil inventories decreased by 8.9 million barrels from the previous week. Expectations were for a 2.5-million-barrel draw. Gasoline inventories remained unchanged last week, while distillate fuel inventories increased by 0.7 million barrels last week. Total commercial petroleum inventories decreased by 7.3 million barrels last week.

Demand remains strong especially for distillates. Total products demand over the last month averaged 21.2 million barrels per day, up by 2.0% from the same period last year. Over the last month gasoline demand averaged over 9.7 million barrels per day, down by 0.3% from the same period last year. Distillate fuel demand averaged over 4.3 million barrels per day over the month, up by 15.9% year over year.

Demand Remains Strong

While demand remains strong, refineries slowed their runs in the latest week. U.S. crude oil refinery inputs averaged about 17.6 million barrels per day during the week ending August 11, 2017, 9,000 barrels per day less than the previous week’s average. Refineries operated at 96.1% of their operable capacity last week. Gasoline production decreased last week, averaging over 10.0 million barrels per day. Distillate fuel production decreased last week, averaging 5.3 million barrels per day.

Crude oil prices were trading lower despite the better than expected inventory number reported on Wednesday and Tuesday. Prices were unable to recapture trend line resistance which was former support near the 48.50 level. Target support is seen near the July 23 lows at 45.40. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. The occurs as the spread (the 12-day exponential moving average minus the 26-day exponential moving average) crosses below the 9-day exponential moving average of the spread. The index moved from positive to negative territory confirming the sell signal. The relative strength index (RSI) moved lower with price action, which reflects accelerating negative momentum.

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