Energy Prospectus

The U.S. Energy Information Administration said in its weekly report that crude oil inventories rose by 856,000 barrels in the week ended October 22. That compared with analysts' expectations for a decline of 2.6 million barrels, while the American Petroleum Institute late Tuesday reported a supply-gain of 519,000 barrels.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, declined by 237,000 barrels last week, the EIA said.

Total U.S. crude oil inventories stood at 457.3 million barrels as of last week, which the EIA considered to be at the upper half of the average range for this time of year.

The report also showed that gasoline inventories fell by 5.5 million barrels, much more than expectations for a decline of 17,000 barrels.
For distillate inventories including diesel, the EIA reported a decline of 5.2 million barrels.
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Total liquids falling by almost 10 million barrels is bullish, but the market tends to focus first on the crude oil inventory level. My guess is that higher imports caused the increase in crude oil production and higher exports of refined products caused those drops. It happened because weather in the Gulf of Mexico was calm all week.

Obviously, the big declines in refined products is bullish for oil.

A couple things to note in the EIA weekly petroleum report:

> U.S. crude oil production was estimated to be 9,530,000 barrels per day the week ending 8/27/2017 and 9,507,000 BOPD the week ending 10/20/2017. There may be a small amount of oil still shut in because of the hurricanes, but it can't be very much. So ... U.S. oil production is not growing.

> U.S. refineries were running at 96.6% of capacity before Hurricane Harvey made landfall. They dipped to 77.7% of capacity in September and have come back to 87.8% of capacity for the week ending 10/20/2017. I believe they will need to run at over 90% through year-end to meet demand for transportation fuels and heating oil.

> In December, 2016 U.S. refineries processed over 16,500,000 barrels of crude oil per day, which compares to 16,025,000 BOPD processed the week ending 10/20/2017.

> An increase in Net Imports of crude oil of 514,000 BOPD is what caused crude oil inventories to be up more than expected.