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Crude Oil Prices Are Following the EIA Inventory Trend

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EIA inventory report

The EIA (U.S. Energy Information Administration) released its weekly petroleum status report on Wednesday, July 15, 2015. The data showed US commercial crude oil inventories dropped by 4.3 MMbbls (million barrels) to 461.4 MMbbls for the week ended July, 10, 2015. In contrast, oil inventories increased by 0.40 MMbbls to 465.8 MMbbls for the week ended July 3, 2015.

On July 14, 2015, the API (American Petroleum Institute) reported that crude oil inventories dropped by 7.3 MMbbls for the week ended July 10, 2015. Market surveys estimated that crude oil inventories might decline by 1.9 MMbbls over the same period. The better-than-expected inventory decline might support crude oil prices. However, oversupply concerns overshadowed crude oil price movements, and oil prices declined in yesterday’s trade.

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The increase in refinery demand led to the decline in US oil inventories. Oil demand from refineries increased by 229,000 barrels to 16.8 MMbpd (million barrels per day) for the week ended July 10, 2015. Refinery utilization was at 95.3% during the same period. Last week, refineries operated at 94.2% of their operable capacity for the week ended July 3, 2015.

Likewise, US gasoline and distillates inventories increased by 0.1 MMbbls and 3.8 MMbbls for the week ended July 10, 2015. Market consensus also estimated an increase in gasoline and distillates inventories by 0.67 MMbbls and 3.81 MMbbls, respectively, over the same period.

The current crude oil inventories are 23% more than the 375 MMbbls recorded in 2014. Record oil inventories might pressure crude oil prices despite declining US oil inventories.

Impact

The roller coaster ride of crude oil prices affects oil and gas producers like Apache (APA), Devon Energy (DVN), and Noble Energy (NBL). Combined, these stocks account for 9.42% of the Energy Select Sector SPDR ETF (XLE). These companies also have an oil production mix that’s greater than 46% of their production portfolio. The uncertainty in crude oil prices also negatively affects ETFs like XLE and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

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