Crude Consolidates Despite Surprise Inventory Draw

Crude oil prices were lower on Thursday following the Department of Energy’s inventory report which was delayed one day due to the Memorial Day holiday.  While crude inventories declined, brent prices continued to climb buoying gasoline following news that OPEC reduced production in May. The U.S. saw domestic production climb, to a new record of 10.77 million barrels a day, while imports dropped in the latest week. Refiners picked up their run rate, increasing production of both distillates and gasoline.

Technicals

Crude oil prices consolidated on Thursday after bouncing near support at an upward sloping trend line that comes in near 66. Resistance is seen near the 10-day moving average at 69.96. Momentum is negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to lower prices. The fast stochastic on the other hand, is printing a reading of 18, below the oversold trigger level of 20 which could foreshadow a correction.

Imports Dropped

The EIA reported that U.S. crude oil imports averaged over 7.6 million barrels per day last week, down by 528 thousand barrels per day from the previous week. This lead to the drop in crude oil inventories. Over the last four weeks, crude oil imports averaged about 7.7 million barrels per day, 5.5% less than the same four-week period last year. Total gasoline imports last week averaged 959,000 barrels per day. Distillate fuel imports averaged 237,000 barrels per day last week. Domestic production increased by 44K barrels per day rising to 10.77 million barrels a day.

Refineries are picking up utilization

Refineries are picking up utilization. U.S. crude oil refinery inputs averaged about 17.2 million barrels per day during the week ending May 25, 2018, 527,000 barrels per day more than the previous week’s average. Refineries operated at 93.9% of their operable capacity last week. Gasoline production increased last week, averaging over 10.4 million barrels per day. Distillate fuel production increased last week, averaging about 5.3 million barrels per day.

Inventories were mixed

The EIA revealed that U.S. commercial crude oil inventories decreased by 4.2 million barrels from the previous week. Expectations were for a 0.4-million barrel draw. At 434.5 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Gasoline inventories increased by 0.5 million barrels last week, compared to expectations of a 1.5-million barrel build. Distillate fuel inventories unexpectedly increased by 0.6 million barrels last week, compared to a small draw that was expected. Total commercial petroleum inventories increased by 1.8 million barrels last week.

Demand Remains Strong

The EIA reported that total products demand over the last month averaged about 20.7 million barrels per day, up by 1.3% from the same period last year. During the last month, gasoline demand averaged about 9.7 million barrels per day, up by 0.8% from the same period last year. Distillate fuel demand averaged over 4.1 million barrels per day over the month, down by 1.5% from the same period last year.