EIA inventory report
The EIA (U.S. Energy Information Administration) releases the weekly crude oil stock report every Wednesday. Yesterday, the EIA reported that the crude oil stockpile dropped by 2.7 MMbbls (million barrels) to 467.9 MMbbls for the week ending June 12, 2015. Likewise, the stockpile fell by 6.8 MMbbls to 470.6 MMbbls for the week ending June 5, 2015. Market estimates showed that the crude oil stockpile could fall by 1.7 MMbbls, according to a Reuters survey. The stockpile could fall by 2.5 MMbbls for the week ending June 12, according to Bloomberg sources. This is positive for crude oil prices.
Gasoline inventories increased by 500,000 barrels for the week ending June 12, 2015—compared to a drop of 3.9 MMbbls for the week ending June 5, 2015. Market surveys showed that gasoline stocks could decline by 2.9 MMbbls for the week ending June 12, 2015. The unexpected increase in gasoline inventories led to the decline in crude oil prices. Gasoline is a refined form of crude oil. It’s mainly used for transportation.
The EIA data added that US refinery demand declined by 294,000 bpd (barrels per day) to 16.3 MMbpd (million barrels per day) for the week ending June 12, 2015—compared to the previous week. For the week ending June 12, 2015, US crude oil imports increased by 444,000 bpd to 7.1 MMbpd against the previous week. Crude oil imports averaged around 6.9 MMbpd over the last four weeks. This is 5.3% lower than the import levels last year.
Declining crude oil inventories imply that supply is declining or demand is increasing. Currently, the crude oil markets are oversupplied. However, let’s analyze whether or not the demand is improving.
Uncertainty in crude oil prices impacts US upstream oil producers like Newfield Exploration (NFX), Chevron (CVX), and Hess (HES). They account for 4.92% of the Energy Select Sector SPDR ETF (XLE). These stocks also have a crude oil production mix that’s more than 53% of their total production.