|Crude oil inventories (weekly change)||-5.1M barrels||2.6M barrels|
|Distillates (weekly change)||6.3M barrels||1.8M barrels|
|Gasoline (weekly change)||10.6M barrels||0.9M barrels|
A dip back in imports contributed to a 5.1 million barrel draw in oil inventories to 482.3 million barrels in the January 1 week. Though refineries cut back on gasoline production, gasoline inventories still jumped 10.6 million barrels. Distillate inventories, here reflecting an increase in refinery production, rose 6.3 million barrels and remain unusually heavy, the result of this winter's unseasonable warmth. Demand readings are unusually weak and are pointing to less refinery output ahead with gasoline down 3.6 percent year-on-year and distillates down 9.3 percent. Rising product inventories together with weak demand is not a good combination for the oil sector. WTI, at $34.50, is falling sharply in initial reaction to the data.
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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