Inventories rise less than expected
In its weekly crude oil inventory report released for the week ended April 10, the EIA (U.S. Energy Information Administration) announced an increase of 1.3 million barrels. This brought US commercial crude oil inventories to 483.7 million barrels—the highest amount in almost 80 years.
Meanwhile, analysts had been expecting an increase of 3.6 million barrels.
When inventories increase less than expected, it’s bullish for crude prices. This is positive for major oil producers such as Chevron (CVX), Occidental Petroleum (OXY), Apache (APA), and ConocoPhillips (COP). All of these companies are components of the iShares Global Energy ETF (IXC) and make up ~14% of the fund.
Supplies decreased last week
Last week, crude oil production decreased by 20,000 barrels per day to 9.38 million barrels per day. Production seems to have moderated from its peak of 9.42 million barrels per day—the highest in EIA data going back to 1983—that it hit the week of March 20.
Another contributor to declining crude stocks was a decrease in imports. Imports declined by a staggering 1.069 million barrels per day last week to 7.14 million barrels per day.
Supply forecasts for 2015
According to the EIA’s STEO (“Short-Term Energy Outlook”) released April 7, total US crude oil production averaged 9.3 MMbpd (million barrels per day) in March. It averaged 9.4 MMbpd in February.
The report forecasts production will decrease from June through September before it begins to increase again. The EIA also estimates that crude output will average ~9.2 MMbpd in 2015 and ~9.3 MMbpd in 2016. Output averaged ~8.67 MMbpd in 2014.
Importance of crude oil and inventories
Crude oil is one of the most important sources of energy for the world. Its refined products have several applications that range from powering cars to building roads. The price of crude oil is important not only for individuals but also for the world’s economies and industries. Supply-and-demand trends determine crude oil prices. Such trends can easily be gauged by taking a look at crude inventory levels.