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EIA Report Caused Collateral Damage in the Crude Oil Market

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EIA inventory report

On August 29, 2015, the EIA (U.S. Energy Information Administration) released its weekly petroleum status report. It reported that US commercial crude oil inventories rose by 2.6 MMbbls (million barrels) to 456.2 MMbbls for the week ending August 14, 2015—compared to the fall in crude oil stocks by 1.7 MMbbls to 453.6 MMbbls for the week ending August 7, 2015.

The industry estimates from Bloomberg to the API (American Petroleum Institute) projected that the crude oil stockpile could fall between 0.8 MMbbls and 2.3 MMbbls over the same period. The unexpected rise in crude oil inventories fueled the long-term oversupply concerns in the market. The bloodbath continued in the crude oil market. Prices fell more than 4% for the third time in a single day in the last 13 trading sessions.

 

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Refined products

The EIA added that gasoline inventories fell by 2.7 MMbbls for the week ending August 14, 2015. The better-than-expected rise in gasoline inventories led to carnage in gasoline prices. Gasoline prices fell more than 6% in yesterday’s trade. Market surveys estimated that gasoline inventories might rise by 1.6 MMbbls for the week ending August 14, 2015.

In contrast, distillates stocks rose by 0.6 MMbbls for the week ending August 14, 2015—compared to market estimates of a rise in distillates stocks by 1.32 MMbbls.

Crude oil inventories might have risen due to seasonal refinery maintenance or a slowdown in the summer driving season demand. The rise in US crude oil imports might have also led to the rise in crude oil stocks. Crude oil imports rose by 465,000 bpd (barrels per day) to 8 MMbpd (million barrels per day) for the week ending August 14, 2015—compared to the previous week. Monthly crude oil imports averaged 7.6 MMbpd—0.90% lower than the levels in 2014.

Crude oil inputs to refineries fell by 254,000 bpd to 16.8 MMbpd for the week ending August 14, 2015—compared to the previous week. Over the same period, refineries operated at 95.10% of their operable capacity.

The rising crude oil inventory implies that supplies are rising or demand is falling. As a result, they put downward pressure on crude oil prices.

US crude oil producers like Murphy Oil (MUR), Marathon Oil (MRO), and Newfield (NFX) are impacted the most compared to downstream players in the crude oil bear market. These companies account for 2.39% of the Energy Select Sector SPDR ETF (XLE). Oil and gas ETFs like XLE and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) are also affected by lower crude oil prices.

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