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Crude Oil Prices Are Priced in the EIA’s Crude Inventory report

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EIA crude oil inventory report 

The EIA[1. U.S. Energy Information Administration] published its weekly petroleum status report on January 21, 2016. The government agency stated that the US crude oil inventory rose by 4 MMbbls (million barrels) to 486.5 MMbbls for the week ending January 15, 2016. The American Petroleum Institute reported that the US crude oil inventory rose by 4.6 MMbbls for the same period. Also, US crude oil stocks rose for the second straight week.

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Crude oil inventory estimates

Bloomberg surveys estimated that crude oil stocks would have risen by 2.2 MMbbls for the week ending January 15, 2016. Likewise, Citigroup and Platt’s survey estimated that crude oil stocks would have risen by 2.5 MMbbls and 2.9 MMbbls, respectively. So, the US crude oil prices were priced in ahead of the release of the EIA’s crude oil inventory report. Secondly, weather and short covering overshadowed the larger-than-expected rise in crude oil inventory that we covered in the first part of the series.

Factors driving crude oil inventory

The weaker refinery demand boosted crude oil stocks that we covered earlier. The rise in US crude oil production also supported crude oil inventory despite the long-term consensus of a fall in US production. Check out the fourth part of our series to know more about US production.

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Crude oil inventory by region

The EIA divides US crude oil storage into five main regions, namely the East Coast, Midwest, Gulf Coast, Rocky Mountains, and West Coast regions. Crude oil stocks at the Gulf Coast rose to 241.8 MMbbls for the week ending January 15, 2016, compared to 236.6 MMbbls in the previous week. However, crude oil inventory in the Midwest fell to 149.9 MMbbls for the same period. The Gulf Coast and Midwest regions had the highest crude oil inventories in the United States.

Impact

The current crude oil stock is 22% more than the level of 2014. It’s also at an 80-year high for this time of year. Record US and global inventory will likely continue to put pressure on global crude oil prices.

Meanwhile, record oil inventory and a wider contango market should support oil tankers like Nordic American Tankers (NAT) and DHT Holdings (DHT). For more on that, you can read How the Fed Influences Contango Crude Oil Market Traders. Lower crude oil prices will also likely affect the margins of oil producers like Occidental Petroleum (OXY), Hess (HES), and Marathon Oil (MRO).

ETFs and ETNs like the Vanguard Energy ETF (VDE), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the VelocityShares 3x Long Crude Oil ETN (UWTI), and the First Trust Energy AlphaDEX Fund (FXN) are influenced by ups and down in the oil market.

Read the next part of our series to see how gasoline and distillate inventories influenced the oil market.

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