Once again, the inventories of crude oil in the United States showed a decline.  This is the fifth straight week in which we have seen such a decline.  This could be an indication that the supply glut of oil that was blamed for driving down oil prices in the latter stages of last year has finally begun to abate but this is by no means certain as crude oil inventories still remain at record levels.

At the end of the week ended May 29, 2015, the nation’s commercial inventories of crude oil contained a total of 477.4 million barrels of oil.  This is a slight decrease from the 479.4 million barrels that were contained in these same inventories at the end of the week ended May 22, 2015.  However, the nation’s oil inventories are still significantly above last year’s levels.  At the end of the week ended May 30, 2014, the nation’s commercial crude inventories contained a total of 389.5 million barrels of oil.  One reason for the decline in inventories, as I discussed in the previous article in this series is that the weather has been greatly improving in many areas of the country and this may be encouraging consumers to drive more.

As was the case for the past few weeks, the amount of gasoline being stored in the nation’s inventories of that substance also declined.  However, the decline was slight.  At the end of the week ended May 29, 2015, the nation’s inventories of motor gasoline contained a total of 220.3 million barrels of gasoline.  This compares to the 220.6 million barrels of gasoline contained in these same inventories at the end of the week ended May 22, 2015.  However, gasoline inventories are still significantly higher than during the same week last year.  At the end of the week ended May 30, 2014, the nation’s inventories contained a total of 211.8 million barrels.  Overall, the week-over-week decline in inventories provides further evidence that consumers are increasing their demand for gasoline, likely as a response to the improving weather.

This decrease in gasoline inventories comes despite the fact that the nation’s refineries increased the amount of gasoline that they supplied to the market.  During the four-week period ended May 29, 2015, the nation’s refineries supplied an average of 9.294 million barrels of gasoline per day to the market.  This compares to an average of 9.245 million barrels of gasoline per day supplied during the four-week period ended May 22, 2015.  As might be expected, refineries are also supplying considerably more gasoline to the market than in the previous year.  During the four-week period ended May 30, 2014, the nation’s oil refineries supplied an average of 9.145 million barrels of gasoline per day to the market.

There are two primary reasons for the growth in gasoline production.  The first is that the nation’s refineries have largely retooled themselves in preparation for the summer driving season.  The second is that refineries have been processing more crude oil in aggregate.  During the four-week period ended May 29, 2015, the nation’s oil refineries processed an average of 16.260 million barrels of oil per day, up from the 16.245 million barrel per day average that they processed during the four-week period ended May 22, 2015.  As with many of the other figures in this week’s report, this is considerably higher than last year’s numbers.  During the four-week period ended May 30, 2014, the nation’s oil refineries processed an average of 15.881 million barrels of crude oil per day.

In conclusion, it does appear that the nation’s oversupply of oil is beginning to fix itself, although inventories still remain at historic highs.  As the summer driving season accelerates, we may continue to see inventories decline as the balance between supply and demand improves.