Yahoo Finance Crude Oil Inventories Sail Past Analysts’ Estimates Last Week
Bullish Inventory, Bearish Production: What's Up with Crude Oil?
Crude oil inventories
In its weekly Petroleum Status Report released on Wednesday, June 10, the EIA (U.S. Energy Information Administration) announced a decrease of 6.8 million barrels (or MMbbls) in crude oil inventories for the week ended June 5.
Analysts were expecting a much smaller decrease of 1.5 MMbbls.
What that means
When inventories decrease more than expected, it’s bullish for crude oil prices. This is positive for major oil producers such as Hess Corporation (HES), ConocoPhillips (COP), Murphy Oil (MUR), and Oasis Petroleum (OAS). All these companies are components of the iShares U.S. Energy ETF (IYE) and make up ~6.2% of the fund.
Background on crude oil inventories
Crude oil inventories touched a peak of 490.9 million barrels in the April 24 week. It was the highest in 80 years. Crude oil prices and energy companies had been battered by surging supplies. In the week ending May 1, inventories began turning downward for the first time in four months, as you can see in the above graph. This signaled an easing of the supply glut.
Since inventories started declining in May, inventories have declined by ~20.3 MMbbls. Last week, inventories stood at 470.6 million barrels.
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 thing 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 for 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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