WTI Rises on Supply Numbers, but Shrugs Off Crude Inventory Build
US refinery inputs
In its weekly report on September 10, the EIA (U.S. Energy Information Administration) reported that US crude oil refinery inputs averaged 16.11 MMbpd (million barrels per day) during the week ending September 4. This was a fall of 279,000 bpd (barrels per day) compared to the prior week’s average.
The fall in refinery inputs caused the refinery utilization rate for the week of September 4 to fall to 90.9%. This was 1.9 percentage points less than the 92.8% utilization rate in the previous week ending August 28.
Compared to last year, the current refinery input levels are ~1.4% lower. The four-week average refinery input of 16.483 MMbpd to September 4 was 0.3% higher than the same period last year at ~16.430 MMbpd. The four-week average fell ~1.4% week-over-week. Looking at four-week averages gives you a smoother view of the trend for what’s otherwise a volatile number week-over-week.
What this means
A fall in crude oil inputs indicates that refiners like Marathon Petroleum (MPC) and Valero Energy (VLO) as well as refining MLPs like Calumet Specialty Products Partners (CLMT) and CVR Refining (CVRR) are cutting throughputs due to the current crude oil and refined product price environment. The lower demand for crude oil lends a bearish tone to crude oil prices (USO). The dip in demand is typical for this time of the year when refiners enter fall maintenance season.
So, the drop in refinery inputs or demand was the major reason for the crude oil inventory build, which we discussed in part one of this series. Supply in the form of crude oil production and imports had actually fallen for the week. Read part two of this series for more on this.
The drop in supply was one of the key drivers behind the ~4% increase in WTI crude oil prices on Thursday, September 10. Later in this series, we’ll look for other reasons why WTI crude oil rose despite the headline bearish inventory number.
Follow our weekly recap of crude oil prices on Market Realist’s Energy and Power page. Check out the latest weekly recap at A Volatile Week for Crude Oil Prices: Analyzing the Key Reasons.
Refinery demand
Refineries are the main source of crude oil demand. Refinery input levels affect crude oil inventory draws and builds. Refining throughputs affect inventory levels not only for crude oil, but also for refined products like gasoline and distillates. We’ll discuss the inventory levels for these products later in this series.