Why Did the Crude Oil Market Rise despite Bearish Fundamentals?
Gasoline stocks
The EIA (U.S. Energy Information Administration) reported that gasoline stocks fell by 1.5 MMbbls (million barrels) to 255 MMbbls for the week ending February 26, 2016. Last week, gasoline stocks fell by 2.2 MMbbls for the week ending February 19, 2016. Gasoline stocks fell for the second time in the last seven weeks. Gasoline stocks fell due to the fall in gasoline production. We’ll discuss gasoline production in more detail in the next part of the series.
Gasoline stocks by region
The Gulf Coast, Midwest, and East Coast regions impact the nationwide gasoline inventory the most. The Gulf Coast region’s gasoline stocks rose to 83.5 MMbbls from 82.5 MMbbls for the week ending February 26, 2016. In contrast, gasoline stocks in the East Coast region fell to 70.9 MMbbls from 72.5 MMbbls for the same period. The Midwest region saw gasoline stocks remain flat at 59.9 MMbbls for the same period.
Gasoline stock estimates and impact
Market surveys estimated that gasoline stocks could fall by 1.1 MMbbls for the week ending February 26, 2016. The current gasoline stocks are 6% more than the level last year. The record high gasoline stocks will continue to put pressure on gasoline prices. The historic low gasoline prices will have a negative impact on oil refiners like Tesoro (TSO), Phillips 66 (PSX), Marathon Petroleum (MPC), Sunoco (SUN), and Western Refining (WNR). The low prices will have a negative impact on the crude oil demand. Gasoline is the refined form of crude oil. As a result, it will have a negative impact on oil producers like Hess (HES) and Devon Energy (DVN). The record oil and refined product stocks support oil storage and transportation companies like DCP Midstream Partners (DPM), Spectra Energy (SE), and Energy Transfer Partners (ETP). It also benefits oil tankers like Nordic American Tankers (NAT), Teekay Tankers (TNK), DHT Holdings (DHT), and Tsakos Energy Navigation (TNP).
The ups and downs in oil and gas prices impact ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the First Trust Energy AlphaDEX Fund (FXN), and the VelocityShares 3x Long Crude Oil ETN (UWTI).
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