Oil And Gasoline Inventories Continue To Build - No Sign Of Increased Consumer Demand

There have been some very interesting trends occurring in the nation's oil inventories over the past two weeks. As has been the case for the past several weeks, the quantity of crude oil contained in domestic commercial crude inventories continued to increase and remains at levels considerably above last year's levels. In addition, despite <reports> that consumer demand for gasoline has begun to increase, the nation's inventories of gasoline also consistently grew. This growth in gasoline inventories came in spite of declining gasoline production. Finally, the price of oil and gasoline increased, indicating that the link between oil inventories and prices that has been present historically has begun to fray.

At the end of the week ended February 6, 2015, the commercial inventories of crude oil in the United States contained a total of 417.9 million barrels of oil. This represents an increase over the 413.1 million barrels of oil that these same inventories contained at the end of the week ended January 30, 2015. This in itself is an increase over the 406.7 million barrels contained in these inventories at the end of the week ended January 23, 2015. Clearly this shows that the supply of crude oil in the United States continues to exceed demand. As has been the case since early December (but not prior to that), the amount of oil contained in the nation's inventories exceeded the amount that was present in these inventories at the end of the same week last year. At the end of the week ended February 7, 2014, the nation's commercial inventories of crude oil contained 361.4 million barrels of crude oil.

At the end of the week ended February 6, 2015, the nation's inventories of motor gasoline contained 242.6 million barrels of gasoline. This is an increase over the previous week, at the end of which saw these inventories containing 240.7 million barrels of gasoline. This in itself represents growth over the week before this as well. At the end of the week ended January 23, 2015, the nation's gasoline inventories contained a total of 238.3 million barrels of motor gasoline. Interestingly, these inventories were growing despite the increasing demand for gasoline from consumers. These inventories, as with oil inventories, contained significantly more gasoline than at the same time last year. At the end of the week ended February 7, 2014, the nation's inventories of motor gasoline contained a total of 233.1 million barrels of gasoline.

Given the growth in consumer demand for gasoline, one might expect this growth in gasoline inventories to be caused by production growth in excess of demand growth but this was not the case. In fact, the production of gasoline has been declining over the past several weeks. During the four-week period ended February 6, 2015, domestic oil refineries produced an average of 8.649 million barrels of motor gasoline per day. As the chart below shows, this is lower than the four-week period ended January 30, 2015 and also lower than the four-week period ended January 23, 2015. With that said, the latest year's production figures were higher than the corresponding production figures last year. During the four-week period ended February 7, 2014, the nation's oil refineries produced an average of 8.355 million barrels of gasoline per day.

The primary reason why production of gasoline has been going down is because the amount of crude oil that is being processed by the nation's oil refineries has been decreasing. During the four-week period ended February 6, 2015, domestic oil refineries processed an average of 15.318 million barrels of crude oil per day. This compares to the average of 15.401 million barrels per day processed during the four-week period ended January 30, 2015. While this is quite clearly a week-over-week decrease, it is still higher than what these refineries processed during the corresponding period last year. During the four-week period ended February 7, 2014, domestic oil refineries processed an average of 15.224 million barrels of crude oil per day.

Thus, the oil inventories report continues to show the same trends that it has for the past few months. It will be useful to watch gasoline inventories over the next few weeks however, in order to determine just how significant the growth in consumer demand is.