Lower refinery input demand will likely pressure WTI oil prices
WTI and Brent prices retreat as US crude oil production soars (Part 3 of 8)
Refinery inputs
U.S. crude oil refinery inputs averaged over 16.3 million bpd during the week ending September 5. Input levels were 100,000 bpd less than the previous week’s average. Refinery input levels have remained in the vicinity of 16 million bpd in 2014.
Operating capacity
Refineries operated at 93.9% of their capacity last week, 0.6 percentage points up from the week of August 29. Analysts were expecting a 0.33 percentage-point decline. As refineries enter into seasonal maintenance, analysts expect a lower operating rate.
Refinery maintenance
As the summer driving season has ended, refiners are scheduling maintenance for September and October as they transition to winter-grade fuel from summer-grade fuels.
As refineries demand less crude and while crude production continues to grow, WTI crude prices will be pressured.
Lower prices affect the profit margins of oil producing companies
As demand for crude lowers, oil producers might face lower WTI crude prices. Producers like ConocoPhillips (COP), ExxonMobil (XOM), Murphy Oil (MUR), and Continental Resources (CLR) anticipate that this might be hurt their margins in the interim period. All these companies are components of the Energy Select Sector SPDR ETF (XLE).
Gasoline inventories
Continue to the following part to read about changes in gasoline inventories last week.
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