|Crude oil inventories (weekly change)||5.4M barrels||-3.1M barrels|
|Gasoline (weekly change)||3.2M barrels||8.1M barrels|
|Distillates (weekly change)||2.9M barrels||11.2M barrels|
The price of oil is dropping sharply in immediate reaction to a sweep of unwanted inventory builds in the January 9 week. Oil inventories, fed by continuing increases in both domestic production and imports, rose 5.4 million barrels in the week to 387.8 million with gasoline inventories up 3.2 million and distillates up 2.9 million. Refineries did cut back production in the week but still operated at a very active 91.0 percent of capacity. Products supplied to the wholesale sector are very heavy, up a year-on-year 7.1 percent for gasoline and up 7.8 percent for distillates in readings that point squarely to decreases ahead for refinery production. WTI is down 50 cents and testing support at $46.
The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S., whether produced here or abroad. The level of inventories helps determine prices for petroleum products.
Petroleum product prices are determined by supply and demand - just like any other good and service. During periods of strong economic growth, one would expect demand to be robust. If inventories are low, this will lead to increases in crude oil prices - or price increases for a wide variety of petroleum products such as gasoline or heating oil. If inventories are high and rising in a period of strong demand, prices may not need to increase at all, or as much. During a period of sluggish economic activity, demand for crude oil may not be as strong. If inventories are rising, this may push down oil prices.
Crude oil is an important commodity in the global market. Prices fluctuate depending on supply and demand conditions in the world. Since oil is such an important part of the economy, it can also help determine the direction of inflation. In the U.S., consumer prices have moderated whenever oil prices have fallen, but have accelerated when oil prices have risen.
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