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Why energy investors track crude inventory data

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Nov. 27 2019, Updated 2:03 a.m. ET

EIA inventory data

The U.S Energy Information Administration (or EIA) reports weekly figures on crude oil inventories every Wednesday. The report also provides data on distillates and gasoline inventories. They’re refined products of crude oil.

crude inventories

Crude oil inventory levels change based on demand and supply trends. Demand is mainly from refineries that process this crude into refined products—like gasoline and heating oil. Supplies come from sources like domestic production and imports from other countries.

Inventories increase when demand is lower. They decrease when demand is higher than supplies for the week.

Every week, analysts anticipate an increase or decrease in crude inventories based on demand and supply expectations for that week.

Analysts expected an increase of 3.65 million barrels (or MMbbls) in crude inventories last week. This series covers the actual changes in inventories.

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Usually, if the actual decline is more than analysts expected, it implies that demand was more-than-anticipated or supplies were less-than-anticipated. However, if the decline is less than what analysts expected, it implies that demand was less-than-anticipated or supplies were more-than-anticipated.

The difference between actual and expected declines affects crude prices. We’ll cover last week’s crude price movements later in this series.

Key stocks and exchange-traded funds (or ETFs)

Crude oil prices directly affect earnings for major oil producers—like ExxonMobil (XOM), Chevron Corp. (CVX), ConocoPhillips (COP), and Hess Corp. (HES). These companies are all major parts of energy ETFs like the Energy Select Sector SPDR (XLE).

Cushing inventories

Another important figure that the EIA reports is the level of crude oil inventories at Cushing, Oklahoma. Cushing is a major inland oil hub in the U.S. It’s the pricing point for the North American “benchmark,” West Texas Intermediate (or WTI) crude.

Inventory levels at Cushing reflect the pace that increasing U.S. oil supply is moving from major inland production areas—like the Bakken in North Dakota and the Permian in west Texas—to end refining markets.

A buildup of inventories at Cushing may indicate that the oil supply growth is outpacing the takeaway infrastructure growth. So, a buildup of inventories at Cushing can pressure the price of WTI crude downwards and vice versa.

Later in this series, we’ll discuss the changes in inventories and oil prices last week.

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