Oil And Gasoline Inventories Continue To Climb, Could Be Pointing To Economic Weakness

Over the past several months, I have been publishing a series of weekly reports on this site discussing the weekly trends in domestic oil inventories. Regrettably, other matters prevented me from publishing my weekly report for last week so this week's report will discuss the prevailing trends in both this week's and last week's petroleum status report published by the Energy Information Administration.

Oil inventories continued to increase during the week ended January 9, 2015, as the amount of crude oil contained in the nation's commercial inventories of crude oil increased to 387.8 million barrels from 382.4 million barrels at the end of the previous week. These inventories grew yet again and much more substantially during the week ended January 16, 2015. At the end of that week, the nation's inventories of crude oil contained a total of 397.9 million barrels of crude. This is substantially greater than the 351.2 million barrels of oil that these inventories contained at the end of the corresponding week last year. This clearly supports the claim that the mainstream media has been making that the United States is oversupplied with oil. It appears to be the case that this oversupply is caused by falling demand for oil due to a weakening economy rather than by an excess of production.

It is worth noting that the nation's inventories of motor gasoline have also been growing in size but at a slower rate than crude oil inventories. During the week ended January 9, 2015, the nation's commercial inventories of motor gasoline grew from 237.2 to 240.3 million barrels of gasoline. These inventories grew again during the week of January 16, 2015 to 240.9 million barrels of motor gasoline. As is the case with crude oil inventories, the nation's commercial inventories of motor gasoline currently contain more gasoline than these inventories contained at the same time last year.

Interestingly, this increase in motor gasoline inventories comes despite the fact that the production of gasoline at the nation's oil refineries declined somewhat over the most recent weeks. During the four week period ended January 9, 2015, the nation's refineries produced an average of 9.204 million barrels of gasoline per day, a decline from the average daily production of 9.329 million barrels of gasoline produced during the four week period ended January 2, 2015. Motor gasoline production declined again during the four week period ended January 16, 2015 to an average of 9.037 million barrels per day. The fact that gasoline production has been declining but inventories have been growing could also be a sign that demand is beginning to fall which is a sign of economic weakness.

One of the reasons for these declines in gasoline production is that the amount of oil being sent and processed by the nation's oil refineries has also been declining. During the four week period ended January 9, 2015, the nation's refineries received and processed an average of 16.258 million barrels of crude oil per day, a notable decline from the daily average of 16.360 million barrels processed during the four week period ended January 2, 2015. This figure fell again during the most recent four week period, with the nation's refineries processing an average of 15.900 million barrels of crude oil per day. It is worth noting though that despite the declines in refinery utilization, the nation's refineries have still been processing more oil than during the corresponding period last year.

There are certainly signs that the United States has begun to become oversupplied with oil and gasoline. Furthermore, it does appear that this oversupply is increasingly being caused by economic weakness and not so much by an excess of production.