Crude Declines for the Week Despite Falling Rig Count

Crude oil prices were lower for the week moving down 1.43%. The rise in crude oil inventories, and uptick in imports, took some of the luster off prices. Total inventories did move lower as refiners ramped up production increasing input as product inventories declined. Look for imports to drop back this week, but domestic U.S. production should continue to climb. A decline in the Baker Hughes active oil rig count should help buoy prices.

Technicals

Crude oil prices dropped slightly more than 1.4% this week, and appears to be hovering in between the 38.2% Fibonacci retracement of the decline from the summer of 2013 to the beginning of 2016.  Support is seen near the 10-week moving average at 63.25. Additional support is the 38.2% level at 58.87. Resistance on a weekly basis is the 50% retracement at 69.24. Positive momentum has slowed, as the fast stochastic declined from overbought territory pointing to consolidation.

Baker-Hughes Rig Count Declined

Baker-Hughes weekly rig count revealed a 9-rig reduction, to 798. Natural gas showed a 2-rig count increase which was offset by a 11-rig decline in oil rigs.

Refinery operations are on the rise

Refinery operations are on the rise which generated a 18K increase in barrel per day usage up to 16.8 million barrels per day during the week ending March 23, 2018. The Energy Information Administration reported that refineries operated at 92.3% of their operable capacity last week. Gasoline production increased last week, averaging over 10.3 million barrels per day. Distillate fuel production increased last week, averaging over 4.8 million barrels per day.

Despite an uptick in crude oil imports, the monthly average remains lower than the same period last year. The EIA revealed that U.S. crude oil imports averaged about over 8.1 million barrels per day last week, up by 1.1 million barrels per day from the previous week. Over the last month, crude oil imports averaged 7.7 million barrels per day, 4.0% less than the same four-week period last year. Distillate fuel imports averaged 150,000 barrels per day last week.

The rise in crude oil imports led to an increase in U.S. inventories.

The rise in crude oil imports led to an increase in U.S. inventories. The EIA said that U.S. commercial crude oil inventories increased by 1.6 million barrels from the previous week, more than the unchanged figure expected. U.S. crude oil inventories are in the lower half of the average range for this time of year. Gasoline inventories decreased by 3.5 million barrels last week, more than the 1.9 million barrel draw expected. Distillate fuel inventories decreased by 2.1 million barrels last week which was more than the 1.5-million barrel draw expected. Total commercial petroleum inventories decreased by 1.6 million barrels last week.

Demand remains strong

Demand remains strong, and exports of distillate should continue to show that global demand remains robust. The EIA reported that total product demands the last month averaged over 20.7 million barrels per day, up by 5.7% from the same period last year. Gasoline demand averaged about 9.4 million barrels per day, up by 0.5% from the same period last year. Distillate fuel demand was actually lower year over year averaging over 4.0 million barrels per day over the last month, down by 4.1% from the same period last year.