Crude oil prices moved higher despite a larger than expected build in distillate inventories, as the news was trumped with a robust increase in crude oil inventories and solid demand. Imports continue to climb, and production is stable, which is allowing demand to erode the higher levels of inventories current in stock. Recent rig counts point to higher production, but this has not spilled over into official data released by the Energy Information Administration.
Crude oil going to refineries declined in the latest week. The Department of Energy reported that U.S. crude oil refinery inputs averaged 16.6 million barrels per day during the week ending September 16, 2016, 143,000 barrels per day less than the previous week’s average. Refineries operated at 92.0% of their operable capacity last week. Gasoline production increased last week, averaging 10.1 million barrels per day. Distillate fuel production increased last week, averaging about 5.0 million barrels per day.
The Department of Energy reported that U.S. commercial crude oil inventories decreased by 6.2 million barrels from the previous week. Expectations were for a 4-million-barrel increase in crude oil inventories. U.S. crude oil inventories are at historically high levels for this time of year. Gasoline inventories decreased by 3.2 million barrels last week, but are still at the upper limit of the average range. Distillate fuel inventories increased by 2.2 million barrels last week and are well above the upper limit of the average range for this time of year.
Demand still remains very strong. The Energy Information Administration reported that Total products demand over the last four-week period averaged 20.3 million barrels per day, up by 3.0% from the same period last year. Over the last four weeks, gasoline demand averaged over 9.5 million barrels per day, up by 4.1% from the same period last year. Distillate fuel demand was the one weak link as product in this segment averaged about 3.6 million barrels per day over the last four weeks, down by 5.9% from the same period last year. Jet fuel demand is up 8.1% compared to the same four-week period last year.
The technicals continue to show upward momentum in crude oil prices. Prices appear to be having a difficult time exceeding resistance near the 20-day moving average at 48.83. Support is seen near the September lows at 42.75. Momentum appears to be change and poised to turned positive as the MACD (moving average convergence divergence) index generates a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index is printing in the red with an upward sloping trajectory which points to consolidation at the moment. The relative strength index (RSI) moved higher in tandem with price action which reflects accelerating positive momentum.
