The nation’s commercial inventories of crude oil have begun to see consistent declines, with the amount of oil contained in these inventories steadily decreasing since the end of April.  This could be an indication that the United States is no longer oversupplied with oil as it was in previous months.  This oil oversupply has been blamed for the sharp decline in oil prices that we saw in the latter stages of last year, although there were other factors at work as well.  We have seen some reaction to these inventory declines reflected in oil prices, but overall the price of oil continues to be depressed.

At the end of the week ended May 22, 2015, the commercial inventories of crude oil in the United States contained a total of 479.4 million barrels, the lowest level contained in these inventories since the end of March. Obviously, this level is lower than the 482.2 million barrels contained in these same inventories at the end of the week ended May 15. However, despite declining throughout the month of May, these inventories still contained considerably more oil than during the same period last year. At the end of the week ended May 23, 2014, the nation’s inventories of crude oil contained a total of 393.0 million barrels of crude oil.

The nation’s inventories of motor gasoline have also been steadily declining over the past month, likely because the weather has been improving in many areas of the country and people are beginning to travel more. At the end of the week ended May 22, 2015, the nation’s inventories of motor gasoline contained a total of 220.6 million barrels of gasoline. This is a decline from the 223.9 million barrels contained in these same inventories at the end of the previous week. However, it is still well above last year’s levels.  At the end of the week ended May 23, 2014, the nation’s inventories of motor gasoline contained a total of 211.6 million barrels.

This decrease in gasoline inventories comes in spite of the fact that the nation’s refineries have been increasing the amount of motor gasoline that they supply to the market. This shows clear evidence that consumers and businesses have been increasing their demand for gasoline, likely as a result of the improving weather. During the four-week period ended May 22, 2015, the nation’s refineries provided a total of 9.245 million barrels of gasoline per day to the market, up from the 9.042 million barrels per day provided on average during the four-week period ended May 15, 2015.  The nation’s refineries are also providing more gasoline to the market than they did in the corresponding period of last year, continuing a trend that we have been seeing for quite some time now. During the four-week period ended May 23, 2014, the nation’s oil refineries provided an average of 9.099 million barrels of oil per day to the market.

While the primary reason for the growth in gasoline production is that refineries have retooled themselves in preparation for the summer driving months, a second reason is that the nation’s refineries are processing considerably more oil than they did last year. During the four-week period ended May 22, 2015, the nation’s oil refineries processed an average of 16.245 million barrels of crude oil per day. This is a slight increase over the four-week period ended May 15, 2015, which saw these same refineries process an average of 16.157 million barrels of crude oil per day. However, it is considerably greater than the 15.843 million barrels per day average in the corresponding period of 2014.

The decline in oil inventories has begun to become a trend and if that trend continues, it could prove positive for oil prices as it would indicate that the glut that has existed in the United States (but has not existed in the rest of the world) has finally begun to abate. However, it may be too early to draw this conclusion as domestic oil production remains high and the decline in inventories may simply be the result of the approaching summer driving season. It will be worth watching this situation to see if there is indeed a trend developing here.