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EIA’s Crude Oil Inventory Could Rise as Brent-WTI Narrows

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Nov. 18 2015, Published 6:24 a.m. ET

API’s crude oil inventory 

The API (American Petroleum Institute) published its weekly US crude oil inventory report on November 17, 2015. The data showed that the US crude oil inventory fell by 0.48 MMbbls (million barrels) for the week ending November 13, 2015. In contrast, the API added that gasoline stocks rose by 0.24 MMbbls for the same period. The US distillates stocks fell by 1.5 MMbbls during this period.

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EIA’s crude oil inventory 

The API’s crude oil inventory data are a precursor to the EIA’s (U.S. Energy Information Administration) crude oil inventory report. The EIA’s report is expected to release on November 18, 2015. The government data showed that the US crude oil inventory rose by 4.2 MMbbls to 487 MMbbls for the week ending November 6, 2015. Bloomberg and Reuters surveys estimate that the crude oil inventory could rise by 2 MMbbls for the week ending November 13, 2015. The US crude oil stocks rose for the seventh straight week as of November 6, 2015. The current crude oil stocks are 29% more than 378 MMbbls for the same period last year. For this period of the year, they’re also at record levels in the last 80 years. The record US inventory and estimates of rising crude oil stocks will drag crude oil prices lower.

The narrow spread between the US benchmark WTI (West Texas Intermediate) and the global benchmark Brent crude oil will also push US refiners to import more crude oil. As a result, we could see a rise in the crude oil inventory despite the slowing US production and improving refinery demand. The Brent and WTI spread was at $4 per barrel during early November 2015. It narrowed to $2 per barrel during mid-November 2015. The narrow spread benefits US oil producers like Marathon Oil (MRO), Noble Energy (NBL), and Hess (HES). It negatively impacts refiners like Phillips 66 (PSX) and Valero Energy (VLO).

Meanwhile, refined products like gasoline stocks fell by 2.2 MMbbls, but distillates inventories rose by 0.4 MMbbls for the week ending November 6, 2015. Market surveys project that distillates and gasoline stocks are expected to fall by 0.5 MMbbls and 0.4 MMbbls, respectively, for the week ending November 13, 2015.

ETFs like the PowerShares DWA Energy Momentum ETF (PXI) and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO) are also affected by the volatility in the oil and gas market.

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