Why Did the Crude Oil Market Rise despite Bearish Fundamentals?
Gasoline production
On March 2, 2016, the EIA (U.S. Energy Information Administration) released its This Week in Petroleum report. The report highlighted that weekly gasoline production fell by 674,000 bpd (barrels per day) to 9.3 MMbpd (million barrels per day) for the week ending February 26, 2016. The fall in gasoline production led to the fall in gasoline stocks. You can read more about gasoline stocks in the last part of the series. In the next part of this series, we’ll provide the latest update on distillate stocks. Last week, gasoline production rose by 334,000 bpd to 10 MMbpd for the week ending February 19, 2016.
Gasoline demand and imports
The gasoline production fell due to the fall in gasoline demand. Gasoline demand fell by 455,000 bpd to 9.1 MMbpd for the week ending February 26, 2016. The fall in gasoline demand also led to the fall in gasoline imports. Gasoline imports fell to 0.454 MMbpd from 0.566 MMbpd for the week ending February 26, 2016.
Impact
The current weekly gasoline production is 1.75% less than the gasoline production in 2015. Lower gasoline prices led to the decline in gasoline production. Lower gasoline demand and production will have a negative impact on oil producers like Chevron (CVX), ExxonMobil (XOM), Energy XXI (EXXI), Stone Energy (SGY), and Carrizo Oil & Gas (CRZO). Lower gasoline prices will also influence oil refiners like Valero Energy (VLO) and Northern Tier Energy (NTI).
The uncertainty in the oil market impacts the performance of ETFs and ETNs such as the iShares Global Energy ETF (IXC), the Market Vectors Oil Refiners ETF (CRAK), the United States Oil Fund (USO), the VelocityShares 3x Inverse Crude Oil ETN (DWTI), and the iShares U.S. Energy ETF (IYE).
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