The latest oil inventory report shows that the trend that has been present in oil inventories throughout most of this year continued to be broken, as it was last week.  However, the fundamentals did not match the price action of one of the world's most important commodities.

The quantity of crude oil in the nation's inventories declined slightly week-over-week, going from 380.8 million barrels to 379.9 million barrels during the week ended December 12. Throughout most of the weeks of this year, the quantity of crude oil in the nation's crude inventories was lower than in the same week of last year. However, as I showed last week, that is no longer the case. At the end of the week ended December 13, 2013, the nation's crude oil inventories contained 372.3 million barrels of crude oil. Despite this week over week decline in oil inventories, prices continued to fall during the week, with the spot price of West Texas Intermediate falling from $65.89 to $57.81.

While the amount of oil in the nation's inventories decreased week-over week, the amount of gasoline in the nation's inventories increased fairly substantially. At the end of the week ended December 12, 2014, the nation's inventories of gasoline contained a total of 222.0 million barrels of gasoline, up from 216.8 million barrels at the end of the week ending December 5. The general trend in this category so far this year is for these inventories to contain less gasoline than they contained during the same time last year. This rule has now been broken. At the end of the week ending December 13, 2013, the nation's gasoline inventories contained 220.5 million barrels of gasoline.

While the increase in gasoline inventories could be an indication that Americans are reducing their driving, it is more likely due to the increased production of the fuel that has been taking place. During the four-week period ending December 12, 2014, the nation's oil refineries produced an average of 9.15 million barrels of gasoline per day. During the four-week period ending December 5, 2014, these oil refineries produced an average of 9.106 million barrels of gasoline per day. This is significantly higher than what the nation's oil refineries produced last year. During the four-week period ended December 13, 2013, the nation's oil refineries produced an average of 8.787 million barrels of gasoline per day.

The reason why the production of gasoline has been increasing could be because the amount of oil being processed by the nation's refineries has also been increasing. During the four-week period ended December 12, 2014, the refineries in the United States enjoyed 93.4% utilization, processing an average of 16.31 million barrels of oil per day. This is higher than the 16.213 million barrels that these refineries processed per day on average over the four-week period ended December 5, 2014. The nation's refineries also enjoyed higher utilization than during the corresponding period last year. During the four-week period ended December 13, 2013, the nation's refineries in aggregate processed an average of 15.93 million barrels of crude oil per day.

For the second week in a row, the oil inventories in the United States contained more oil than last year. However, these inventories did show a decline from the previous week. As oil is generally believed to be priced based on supply and demand dynamics, this should have resulted in an increase in oil prices. However, oil prices were down slightly at the market close, although the decline was much less than what oil investors have typically been enduring over the past few weeks.