Why mixed inventory figures leave oil prices roughly flat



Oil prices and inventories

On June 11, the U.S. Energy Information Administration (or EIA) reported crude and refined product inventory data for the week ending June 6. Crude oil inventories decreased by 2,596 thousand barrels, compared to analysts’ expectations of a 1,655 thousand barrel decrease. Gasoline, a major product of refined crude, experienced an increase in inventories of 1,697 thousand barrels, compared to an estimated increase of 745 thousand barrels. Distillate, another major refined crude oil product, experienced an increase in inventories of 860 thousand barrels, compared to an estimated increase of 1,090 thousand barrels. Meanwhile, inventories at Cushing, Oklahoma, dropped by 198 thousand barrels—the ninth consecutive weekly decrease.

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Altogether, the larger than expected decrease in crude oil inventories, combined with larger than expected builds in gasoline and smaller than expected increase in distillate caused crude prices to trade roughly flat on the day. West Texas Intermediate (or WTI) crude prices closed at $104.40 per barrel, compared to $104.35 per barrel the day prior. WTI is the major U.S. benchmark for crude oil prices.

WTI crude price movements and broader oil price movements affect crude oil producers because higher prices result in higher margins and earnings. Names with portfolios slanted towards oil—such as Oasis Petroleum (OAS), Hess Corporation (HES), Chevron (CVX), and ExxonMobil (XOM)—may see margins squeezed in a lower oil price environment. Also, oil price movements affect energy sector ETFs such as the SPDR S&P Oil & Gas Exploration and Production ETF (XOP) and the iShares Dow Jones U.S. Energy Sector ETF (IYE).

Last week’s natural gas inventory figures caused prices to trade up. We’ll discuss this in detail in the next section of this series.


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