EIA inventory report
On Wednesday, July 22, 2015, the EIA (U.S. Energy Information Administration) released its weekly crude oil inventory report. The data showed that crude oil stocks rose by 2.5 MMbbls (million barrels) to 463.9 MMbbls for the week ending July 17, 2015. Last week, crude oil inventories fell by 4.3 MMbbls to 461.4 MMbbls for the week ending July 10, 2015.
On July 21, 2015, the API (American Petroleum Institute) reported that crude oil inventories rose by 2.3 MMbbls for the week ending July 17. In contrast, market surveys projected that the oil stockpile would fall by 2.2 MMbbls over the same period. The worse-than-expected inventory rise led to the fall in crude oil prices.
A rise in crude oil inventories negatively impacts crude oil prices. As a result, this impacts crude oil producers like Newfield Exploration (NFX), Hess (HESS), and Apache (APA). They also benefit from higher crude oil prices. Combined, they account for 3.40% of the Energy Select Sector SPDR ETF (XLE). The falling crude oil prices impact ETFs like XLE and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
The rise or fall in the inventory measures the balance in supply or demand. Rising inventory implies that supply is rising or demand is falling. The rising crude oil inventory was due to the rise in crude oil imports. US crude oil imports rose by 587,000 bpd (barrels per day) to 7.9 MMbpd (million barrels per day) for the week ending July 17, 2015. Monthly crude oil imports averaged around 7.5 MMbpd over the same period. This is 2.50% above the levels last year.
The refinery demand also rose by 45,000 bpd to 16.9 MMbpd for the week ending July 17, 2015. The refinery utilization was at 95.50% for the same period. Oil inventories rose despite rising refinery demand.
The EIA also added that gasoline inventories fell by 1.7 MMbbls and distillate stocks rose by 0.2 MMbbls for the week ending July 17, 2015. Gasoline output rose. It was averaging over 10.1 MMBpd during the same period. In contrast, distillate fuel output fell and averaged around 5.1 MMbpd for the week ending July 17, 2015.
The rise in inventories isn’t just impacting crude oil prices. The massive production from the Middle East is also adding pressure to crude oil prices.