Oil prices took a tumble on Wednesday post-EIA report, despite a favorable crude inventory report that showed oil inventories in the United States had shrunk by nearly ten million barrels.
The culprit for the downward price movement? Lower refinery throughputs for the week. In other words, the threat of refinery maintenance season.
Inventory levels are still above the five-year average for this time of year, and the summer driving season is now behind us. A new season now approaches: the dreaded maintenance season.
That fear sent oil prices tumbling despite today’s inventory draw. At 3:00 pm EDT, the WTI benchmark had fallen 3.32% to $41.34. The Brent benchmark had fallen by 2.83% to $44.29.
October WTI futures had also slipped, to $41.33—a $1.41 loss (-3.30%) on the day. WTI futures for the November contract were also down, by $1.42, at $41.66.
Refinery maintenance season is appropriately timed to coincide with the dip in demand as the summer driving season draws to a close, but for crude producers, it is a definitive sign that their refineries will be calling for less crude at a time when all eyes are on future oil demand.
Refiners are unlikely to balk at the downtime right now, as refinery margins have dropped off considerably, with some refiners looking to convert their facilities to biofuels. It is likely that instead, depressed margins and lower demand for gasoline will encourage refiners to take advantage of an extended maintenance period.
Gasoline margins, for example, have been about $1 per barrel in northwestern Europe for about the past two months—this is a drop from $12 per barrel just one year ago.