Crude Oil Price Analysis for March 1, 2018

Crude oil prices were lower on Wednesday following the Energy Information Administrations reported on crude oil inventories and production.  While inventories were mixed and broadly in line with expectations, traders appear to have used the opportunity to take additional profits following Tuesday’s slide.  Crude oil inventories generally build at this time of year as refinery utilization declines.  A bump in imports combined with a small increase in U.S. production likely weighed on prices.

Techinicals

Crude oil prices bounced near support at the 10-day moving average at 62.31. A break of this level would lead to a test of an upward sloping trend line that comes in near 59.80.  Prices remain in an uptrend but are beginning to consolidate. The MACD (moving average convergence divergence) histogram prints in the black with a flattening trajectory which points to consolidation. The RSI (relative strength index) which is a momentum oscillator that measures accelerating and decelerating momentum, is printing a reading of 50, which is in the middle of the neutral range and also reflects consolidation.

Refinery Runs Are Lower

The EIA reported on Wednesday that U.S. crude oil refinery inputs averaged about 15.9 million barrels per day during the week ending February 23, 2018, 49,000 barrels per day more than the previous week’s average. Refineries operated at 87.8% of their operable capacity last week. This is similar to the levels experienced last year at this time. Refineries will likely begin to increase runs in April ahead of the U.S. driving season.

Imports Unexpectedly Declined

Imports unexpectedly increased in the latest week. U.S. crude oil imports averaged 7.3 million barrels per day last week, up by 261,000 barrels per day from the previous week. Over the last month, crude oil imports averaged about 7.5 million barrels per day, 8.1% less than the same month last year. Production in the United States increased, rising 13K week over week.  The current level of 10,283 is near a record high.

Inventories Where Mixed

The Department of Energy also reported that U.S. commercial crude oil inventories increased by 3.0 million barrels from the previous week. Expectations were for a smaller 2.5 million barrel increase. At 423.5 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Gasoline inventories unexpectedly increased by 2.5 million barrels last week, compared to expectations that there would be a small draw. Distillate fuel inventories decreased by 1.0 million barrels last week. Total commercial petroleum inventories increased by 3.7 million barrels last week.

Demand continues to remain strong

Demand continues to remain strong. The EIA revealed that total products demand over the last month averaged 20.4 million barrels per day, up by 2.7% from the same period last year. Over the month gasoline demand averaged 9.0 million barrels per day, up by 3.8% from the same period last year. Distillate fuel demand averaged over 4.0 million barrels per day over the last four weeks, up by 0.9% from the same period last year.

The API reported a build

The American Petroleum Institute (API) reported a build of 933,000 barrels of United States crude oil inventories for the week ending February 23. Analysts had expected a larger build of 2.077 million barrels in crude oil inventories. Last week, the American Petroleum Institute (API) reported a small draw of 907,000 barrels of crude oil, which this week more than offsets. Last week’s API report showed a build in gasoline inventories of 1.468 million barrels. This week, the API reporting build for both crude oil and gasoline. The API reported a build of 1.914 million in gasoline stockpiles, compared to a 190,000-barrel draw that analysts had expected.