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Crude Oil Rally Short-Lived: Fundamentals Still Feeding the Bears

PART:
1 2 3 4 5 6 7
Part 2
Crude Oil Rally Short-Lived: Fundamentals Still Feeding the Bears PART 2 OF 7

EIA Crude Oil Inventory: Key Catalyst in Bearish Crude Oil Market

EIA’s crude oil inventory data 

The EIA (U.S. Energy Information Administration) published its weekly petroleum status report yesterday. The government data showed the US crude oil inventory rose by 0.2 MMbbls (million barrels) to 482.6 MMbbls for the week ending January 8, 2016. In contrast, the US crude oil inventory fell by 5.1 MMbbls to 482.3 MMbbls for the week ending January 1, 2016.

EIA Crude Oil Inventory: Key Catalyst in Bearish Crude Oil Market

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EIA’s crude oil inventory estimates 

Reuters’ surveys estimated that the US crude oil inventory would rise by 2.5 MMbbls for the week ending January 8, 2016. The less-than-expected rise in inventory supported crude oil prices marginally in yesterday’s trade. However, the refined products inventory weighed on the crude oil market. We’ll cover this in the next part of this series. The US crude oil inventory rose due to the fall in refinery demand, which we’ll discuss in the fifth part of this series.

EIA Crude Oil Inventory: Key Catalyst in Bearish Crude Oil Market

EIA’s crude oil inventory by region

The EIA divides US crude oil storage into five main regions: the East Coast (PADD1), the Midwest (PADD2), the Gulf Coast (PADD3), the Rocky Mountains (PADD4), and the West Coast (PADD5). PADD stands for Petroleum Administration for Defense Districts.

EIA Crude Oil Inventory: Key Catalyst in Bearish Crude Oil Market

The Gulf Coast and the Midwest had the highest crude oil inventories in the United States. The Gulf Coast’s crude oil inventory fell to 236.6 MMbbls for the week ending January 8, 2016. In contrast, the Midwest’s inventory rose to 151.2 MMbbls during the same period. Inventories at Cushing, Oklahoma, rose to 64 MMbbls during the week.

Impact

The current crude oil inventory is 26% more than last year’s level. Inventory is also at an 80-year high for this time of year. The record US crude oil inventory has been pushing crude oil prices to 12-years lows, as we covered in the previous part of this series.

Falling crude oil prices affect the profitability of oil producers like ConocoPhillips (COP), Occidental Petroleum (OXY), Hess (HES), and Marathon Oil (MRO). However, falling crude oil prices benefit oil tankers like Nordic American Tankers (NAT), DHT Holdings (DHT), and Euronav (EURN). To learn more, read How the Fed Influences Contango Crude Oil Market Traders.

ETFs and ETNs like the Vanguard Energy ETF (VDE), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), and the VelocityShares 3x Long Crude Oil ETN (UWTI) are influenced by the roller-coaster ride in the oil and gas market.

Read the next part of this series to learn about gasoline and distillate inventories.

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