Highlights
Stocks of crude and refined products ballooned in the Jan. 12 week, data that show levels at or above the top end of historical ranges and that will weigh further on oil prices. Crude oil inventories rose 6.8 million barrels to 321.5 million. Inventories of gasoline jumped 3.5 million barrels with inventories of distillates, including home-heating oil, up 0.9 million. Gains in refined products were posted despite cutbacks by refineries, which operated at only 87.9 percent of capacity vs. 91.5 percent the week before.

Oil prices fell sharply in immediate reaction to the results. Lower oil prices will help ease inflationary pressures but are also likely to stimulate economic growth, a possible net negative for the Treasury market. Lower oil prices will cut into profit margins for oil producers and limit demand for new oil equipment, but otherwise the dip is good news for the stock market.