Oil Inventories Continue To Rise: Supply Glut Continuing

Crude oil inventories continued to climb over the past two weeks. This continued the streak that we have been seeing for some time now and which continues to showcase the oversupply of oil that exists in the United States. Motor gasoline inventories showed much more variation over the same period, showing a somewhat steep decline followed by a slight increase. Oil prices declined slightly over the period, but overall the spot price of oil remained within the range that it has held for the past two months.

At the end of the week ended February 27, the nation's commercial inventories of crude oil contained a total of 444.4 million barrels of crude oil. This represents an increase over the 434.1 million barrels that these same inventories contained at the end of the week ended February 20, a week in which commercial crude inventories increased by 8.5 million barrels over the previous week. Thus, during the most recent week for which information is available, the nation's inventories of crude oil increased by 10.3 million barrels. As has been the case since early December, the nation's commercial crude inventories contained significantly more oil that during the corresponding weeks of last year.

These steady increases in oil inventories did not translate into steady growth in motor gasoline inventories, possibly because consumer demand for gasoline has begun to increase. At the end of the week ended February 27, the nation's commercial inventories of motor gasoline contained a total of 240.1 million barrels of motor gasoline. This is a very slight increase over the 240.0 million barrels that these inventories contained at the end of the week ended February 20. However, motor gasoline inventories declined during that week from 243.1 million barrels to 240.0 million barrels of gasoline. In both cases though, these inventories contained more gasoline than during the corresponding weeks of last year.

One of the reasons for the slight increase in motor gasoline inventories is that the nation's oil refineries produced more gasoline in the most recent week for which information was available than during the previous week. During the four-week period ended February 27, 2015, the nation's oil refineries produced an average of 8.659 million barrels of motor gasoline per day. This is an increase from the four-week period ended February 20, 2015 during which time the nation's oil refineries produced an average of 8.612 million barrels of gasoline per day.

Interestingly, this increase in gasoline production comes even as refinery utilization has been declining. During the four-week period ended February 27, 2015, the nation's oil refineries processed an average of 15.341 million barrels of crude oil per day. This is a significant decline from the four-week period ended February 20, 2015, during which time these same refineries processed an average of 15.448 million barrels of crude oil per day.

The strong increases in oil inventories show that the oil glut that has been oft-reported in the media is indeed present in the United States. However, the increases in gasoline demand are serving to partially offset it and if this demand continues to increase then it may begin to reduce the surplus of oil as more gasoline will need to be refined to service this need.