Yahoo Finance Crude Oil Inventories Fall, but Miss Analysts’ Estimates
Crude Oil Inventories Miss, Production Is Strong: Bearish for WTI
Crude oil inventories
In its weekly Petroleum Status Report released on Wednesday, the EIA (U.S. Energy Information Administration) announced a decrease of 1.9 MMbbls (million barrels) in crude oil inventories for the week ending May 29.
Analysts were expecting a larger decrease of 2.5 MMbbls.
What does it mean?
When inventories decrease less than expected, it’s bearish for crude oil prices. This is negative for major oil producers like Apache (APA), Occidental Petroleum (OXY), Murphy Oil (MUR), and Anadarko Petroleum (APC). All of these companies are part of the iShares US Energy ETF (IYE). They account for ~8% of the fund.
Background
Crude oil inventories touched a peak of 490.9 MMbbls in the April 24 week—the highest in 80 years. Crude oil prices and energy companies had been battered by surging supplies. In the week ending May 1, inventories started turning downward for the first time in four months—see the above graph. This signaled an easing of the supply glut. Inventories declined by ~13.5 MMbbls in May. Last week, inventories stood at 477.4 MMbbls.
It remains to be seen if the downturn in inventories will go deep enough to sustain confidence in the energy industry. Production is a key aspect for investors to watch. We’ll discuss production in the next part of this series.
Importance of crude oil and inventories
Crude oil is one of the most important sources of energy in the world. Its refined products have several applications ranging from powering cars to building roads. The price of crude oil is important not only for individuals, but also for the world’s economies and industries. Supply and demand trends determine crude oil price trends. These trends can easily be gauged from trends in crude oil inventory levels.
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