API crude oil inventory
The API (American Petroleum Institute) released the weekly US commercial crude oil inventory report on November 10, 2015. The data highlighted that crude oil stocks rose by 6.3 MMbbls (million barrels) for the week ending November 6, 2015. The report added that Cushing crude oil stocks also rose by 2.5 MMbbls for the same period. The API estimates that crude oil inputs to refineries and US oil imports also rose for the same period.
EIA’s crude oil inventory estimates and impact
The API data is the guide to the EIA’s (U.S. Energy Information Administration) weekly petroleum status report. The EIA will release its weekly inventory report on November 12, 2015. Last week, the crude oil inventory rose by 2.8 MMbbls to 482.8 MMbbls for the week ending October 30, 2015. In contrast, gasoline and distillates inventories fell by 3.3 MMbbls and 1.3 MMbbls for the same period.
Market surveys project that crude oil stocks could rise by 1.3 MMbbls for the week ending November 6, 2015. In contrast, gasoline and distillates stocks are expected to fall by 0.81 MMbbls and 0.91 MMbbls for the same period. The tug of war between rising crude oil stocks and the falling refined products inventory could swing crude oil prices in either direction.
However, the current crude oil stocks are 27% more than the 2014 level of 380 MMbbls. The rising crude oil stocks and record inventory will put pressure on crude oil prices. The current inventory is also at the highest level for this period of the year in the last 80 years. The record stockpile will put pressure on crude oil prices. It will impact oil producers’ profitability like Apache (APA), EOG Resources (EOG), and ConocoPhillips (COP).
Crude oil contango is the widest in six months
In contrast, the record global inventory is increasing the profitability of oil tankers stocks like Teekay Tankers (TNK), Nordic American Tanker (NAT), and Frontline (FRO). The December 2015 WTI (West Texas Intermediate) crude oil futures contract and January 2016 WTI crude oil futures contract hit the widest spread at $1.27 per barrel on November 11, 2015, since May 2015. The positive difference between the spot and futures crude oil contracts is called a “Contango market.” A Contango market and record inventory suggest that oil prices will likely witness more pain. The ups and downs in the energy market impact ETFs like the PowerShares DWA Energy Momentum ETF (PXI) and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).
Read the next part of the series to learn more about the oil market’s supply and demand.