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Cushing Crude Oil Stocks and Nationwide Inventory Diverge

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Cushing crude oil stocks 

On October 29, 2015, Genscape reported that the crude oil inventory at Cushing, Oklahoma, continued to fall. Likewise, the EIA (U.S. Energy Information Administration) reported that the crude oil stocks at Cushing fell by 785,000 bpd (barrels per day) to 53 MMbbls (million barrels) for the week ending October 23, 2015. Cushing is the largest storage hub in the US. It’s also the delivery point for the NYMEX-traded crude oil futures contract.

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Nationwide crude oil stocks

The inventories at Cushing fell for the second straight week despite the rise in the nationwide crude oil inventories. The EIA reported that the nationwide crude oil stocks rose by 3.4 MMbbls to 480 MMbbls for the week ending October 23, 2015. The nationwide crude oil stocks rose by 26 MMbbls in the last five weeks due to refinery maintenance.

Inventory impacts crude oil prices 

A rise in the crude oil inventory suggests a rise in supply or weak demand. It will negatively influence crude oil prices. In contrast, a fall in the crude oil inventory suggests a fall in the supply or a rise in the demand. It will positively impact crude oil prices. Currently, crude oil stocks are 26% more than the level of 380 MMbbls in 2014. Oil stocks are also at a record level during this time of the year. They’re at a record level in the last 80 years. As a result, record stocks will continue to weigh on the oil market. 

The volatility in the crude oil market will impact oil producers like Apache (APA), EOG Resources (EOG), Pioneer Natural Resources (PXD), and ConocoPhillips (COP). These stocks’ production mix is greater than 41% of their production portfolio. ETFs like the iShares Global Energy (IXC) and the iShares US Oil Equipment & Services ETF (IEZ) are also affected by the roller coaster ride in the oil and gas market.

In the next part of the series, we’ll discuss the US crude oil rigs in October.

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