API inventory estimates
Yesterday, the API (American Petroleum Institute) released its weekly crude oil, gasoline, and distillates stock report. The data showed that oil stocks rose by 1.9 MMbbls (million barrels) for the week ending June 26, 2015—compared to a fall of 3.2 MMbbls for the week ending June 19, 2015. The API data added that gasoline and distillate stocks rose by 334,000 barrels and 263,000 barrels, respectively, for the week ending June 26, 2015.
The crude oil input to US refineries rose by 77,000 bpd (barrels per day) over the same period. In contrast, inventories at Cushing, Oklahoma, fell by 19,000 bpd.
Traders watch API data closely ahead of the EIA (U.S. Energy Information Administration) data. The EIA crude oil inventory data will release on July 1, 2015. Last week, the EIA estimated that oil inventories fell by 4.9 MMbbls to 463 MMbbls for the week ending June 19, 2015. Bloomberg and Reuters surveys suggest that oil stocks could fall by 2.4 MMbbls and 2 MMbbls, respectively, for the week ending June 26, 2015.
The current oil stocks are 20% more than the levels last year. The tug-of-war between record inventories and falling oil stock estimates may swing crude oil prices in the either direction. Also, the long-term growing production from the Middle East will also add pressure to crude oil prices.
Yesterday’s oil rally will benefit upstream players like Hess (HES) Newfield Exploration (NFX), and Chevron (CVX). They account for 14.92% of the Energy Select Sector SPDR ETF (XLE). These stocks also have an oil production mix that’s greater than 53% of their total production. Higher oil prices also benefit energy ETFs like XLE and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).