Larger Than Expected Fuel Inventories Have ETFs Hesitating | ETF Trends

The inventory numbers are in, sending fuel prices lower and energy-related exchange traded funds (ETFs) sputtering while they figure out where to go next.

The supplies were larger than expected, an indicator that high prices are still cutting into demand, reports Stevenson Jacobs for the Associated Press. Oil dropped as low as $117.14 a barrel, its lowest point since May 2.

Distillate fuels, which include diesel and heating oil, also saw increased inventories: a jump of 2.8 million barrels, which was 500,000 more than expected.

This is a key time of year for heating oil, as hurricanes begin to crop up in the Atlantic Ocean. Nancy Marshall Genzer for Marketplace reports that heating oil prices aren’t like gas prices. Instead, distributors are mainly mom-and-pop operations who buy their oil now. They could buy it later, but that’s a risky proposition in the face of hurricane season. If it’s a rough season, consumers could pay 15% to 20% more this winter.

In a surprise to some analysts, gasoline stockpiles fell by 4.4 million barrels. But some said it signals that gas distributors have taken more deliveries from refiners, not that drivers are suddenly increasing their driving now that the average cost per gallon has dropped below $4.

A number of ETFs are affected by the inventory reports, including:

  • United States Heating Oil Fund (UHN), up 2.3% since April 10 inception
  • United States Gasoline (UGA), up 9.1% since Feb. 28 inception
  • United States Natural Gas (UNG), up 11.7% year-to-date
  • United States Oil (USO), up 26.2% year-to-date
  • E-TRACS UBS Bloomberg CMCI Energy (UBN), up 14.4% since April 4 inception
  • PowerShares DB Oil (DBO), up 28.4% year-to-date

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.