Has the Crude Oil Inventory Spread Turned Bearish?
The US commercial crude oil stockpile
In the week ended September 8, 2017, the US commercial crude oil stockpile grew 5.9 MMbbls (million barrels) to 468.2 MMbbls. The market had expected a rise of 4.1 MMbbls. However, US crude oil prices rose 2.2% on September 13, 2017—when the EIA (US Energy Information Administration) released this data.
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The spread between US commercial crude oil inventories and the inventory five-year average could be an important driver for US crude oil prices. Right now, inventories exceed the five-year average.
On a week-over-week basis, the inventory spread has risen 1.6 percentage points. But since the release of the inventory data on September 13, 2017, US crude oil prices advanced 0.3%.
The EIA will release the crude oil inventory data for the week ended September 15, 2017, on September 20, 2017. The market expects a rise of 2.8 MMbbls in US commercial crude oil stockpiles. However, the API (American Petroleum Institute) reported a rise of just half that on September 19. Still, it would take a fall in inventories by ~243 thousand barrels to stop the inventory spread from expanding.
Changes in the inventory spread could also concern Wall Street because equity indexes such as the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) have some allocation to energy stocks.