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Crude Oil Market's Rebalance: Tussle between the US and OPEC

PART:
1 2 3 4 5
Part 2
Crude Oil Market's Rebalance: Tussle between the US and OPEC PART 2 OF 5

Near-Record US Crude Oil Inventories Impact Oil Prices

Crude oil prices  

WTI (West Texas Intermediate) crude oil (RYE) (VDE) (UCO) futures contracts for May delivery fell 0.5% and were trading at $52.3 per barrel in electronic trade at 4:45 AM EST on April 18, 2017. Prices are trading near a one-month high. Likewise, broader markets such as the S&P 500 (SPY) (SPX-INDEX), Dow Jones, and NASDAQ are near all-time highs. Bullish momentum in the US stock market could support oil demand and oil prices. The US is the largest crude oil consumer. For more on crude oil prices, read Part 1 of this series.

Higher crude oil prices have a positive impact on oil and gas producers’ earnings like ExxonMobil (XOM), SM Energy (SM), Marathon Oil (MRO), and Goodrich Petroleum (GDP).

Near-Record US Crude Oil Inventories Impact Oil Prices

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API’s crude oil inventories 

On April 18, 2017, the API (American Petroleum Institute) will release its weekly crude oil inventory report. A market survey estimates that US crude oil inventories could have fallen by 1.5 MMbbls from April 7–14, 2017. A fall in crude oil inventories could support US crude oil (PXI) (USL) (FXN) prices.

EIA’s crude oil inventories  

The API’s report will be followed by the EIA’s (U.S. Energy Information Administration) weekly crude oil inventory report for the week ending April 14, 2017. The report will be released on April 19, 2017, at 10:30 AM EST.

For the week ending April 7, 2017, the EIA reported that US crude oil inventories fell by 2.1 MMbbls (million barrels) to 533.4 MMbbls. US crude oil inventories are near an all-time high. Read US Crude Oil Inventories Slip from All-Time High for more details. 

Impact of US crude oil inventories  

US crude oil inventories have risen by ~54.5 MMbbls, or 10%, in the last 15 weeks. Crude oil prices have risen ~1.3% during this period. Near-record crude oil inventories and a rise in US crude oil production might be responsible for delayed rebalancing in the crude oil market despite major oil producers’ production cut deal.

In the next part of this series, we’ll look at how OPEC’s crude oil production impacts crude oil prices.

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