uploads///US Crude Inventories

Last Week’s Crude Inventories Fall Short of Analyst Expectations

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Apr. 30 2015, Updated 3:28 p.m. ET

Inventories rise less than expected

In its weekly “Petroleum Status Report” released on Wednesday, the EIA (U.S. Energy Information Administration) announced an increase of 1.9 million barrels in crude inventories for the week ended April 24. This took US commercial crude oil inventories to ~491 million barrels—their highest level in almost 80 years.

Analysts had been expecting a larger increase of 3.3 million barrels.

When inventories increase less than expected, it’s bullish for crude prices. This is positive for major oil producers such as Hess Corporation (HES), Pioneer Resources (PXD), Murphy Oil (MUR), and Marathon Oil (MRO). All of these companies are components of the iShares Global Energy ETF (IXC) and make up ~3% of the fund.

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Supplies increased last week

Reversing the trend of the last two weeks, crude oil production increased by 7,000 barrels per day to 9.36 million barrels per day. Production has, however, moderated from its March 20 weekly peak of 9.42 million barrels per day—the highest ever, according to EIA data going back to 1983.

Imports saw a decrease of 319,000 barrels per day to 7.44 million barrels per day. This, along with increased demand—as we’ll discuss later in this series—is what mainly led to the smaller-than-expected inventory build.

Supply forecast for 2015

According to the EIA’s April STEO (“Short-Term Energy Outlook”), released on April 7, total US crude oil production averaged 9.3 MMbpd (million barrels per day) in March. It averaged 9.4 MMbpd in February.

It 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.

The next STEO is due out on May 12.

Importance of crude oil and inventories

Crude oil is one of the most important sources of energy in the world. Its refined products have many applications, ranging 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 price trends. These trends can easily be gauged from trends in crude inventory levels.

In the next part of this series, we’ll take a look at the latest week’s movement in Cushing inventories.

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