uploads///US Crude Inventories

Why energy investors monitor the EIA’s crude inventory report

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Dec. 4 2020, Updated 10:43 a.m. ET

EIA inventory data

The US Energy Information Administration (or EIA) reports weekly figures on the crude oil inventory every Wednesday. The report also provides data on inventories of distillates and gasoline, which are refined products of crude oil.

Crude oil inventory levels change based on demand and supply trends. Demand comes primarily from refineries that process this crude into refined products like gasoline and heating oil. Supply comes from domestic production and imports from other countries.

Inventories increase when demand is lower and 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 in that week.

Analysts had expected a decrease of 2.5 million barrels in crude inventories last week. We’ll discuss actual changes in the crude inventory later in this series.

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The effect of price and profitability

The difference between actual and expected changes in inventories affects crude prices. We’ll cover recent crude price movements in a later part of this series. Crude oil prices directly affect earnings for major oil producers like Continental Resources (CLR), Whiting Petroleum (WLL), Hess Corp. (HES), and ConocoPhillips (COP). These companies are all major components 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, which is a major inland oil hub in the US. It’s the pricing point for the North American “benchmark,” WTI crude.

Inventory levels at Cushing reflect the pace at which the increasing US oil supply moves from major inland production areas such as the Bakken in North Dakota and the Permian in west Texas to the major refining hub situated on the Gulf Coast. A buildup of inventories at Cushing can pressure the price of WTI crude downwards, and vice versa.

The following parts of this series discuss changes in inventories and oil prices this past week.

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