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API Report: Crude Oil Inventories Fell despite an Expected Rise

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Crude oil inventories

The API (American Petroleum Institute) releases its weekly crude oil inventory report every Tuesday—a day before the EIA’s (U.S. Energy Information Administration) crude oil inventory report. It reported that US crude oil inventories fell by 3.9 MMbbls (million barrels) for the week ending January 8, 2016. Analysts expected the inventories to rise by 2.0 MMbbls for that week.

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Analysts estimated a rise in crude oil inventories

Analysts expected crude oil inventories to rise. Due to mild weather, the demand for the heating oil didn’t reach the expectations. The demand for gasoline is also weak. Inventories are building at record levels. As a result, the refinery utilization will fall. It could pull back the crude oil demand. Surprisingly, crude oil inventories fell by 3.9 MMbbls for the week ending January 8, 2016.

What’s the impact of falling crude oil inventories?

A fall in crude oil inventories is usually bullish for crude oil prices (USO) when analysts are expecting a rise in crude oil inventories. The fall in crude inventories indicates rising crude oil demand or falling crude oil supplies. When the crude oil demand increases, the prices will rise. This increases oil producers’ revenue. Conversely, a fall in crude oil supplies means lower production volumes. When production volumes decrease, the operational costs will rise. This can impact crude oil producers’ profitability like Apache (APA), Devon Energy (DVN), ConocoPhillips (COP), Anadarko Petroleum (APC), and Murphy Oil (MUR).

The iShares U.S. Oil & Gas Exploration and Production ETF (IEO) tracks 6.2% of its investments from Anadarko Petroleum.

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