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Will the API Crude Oil Inventory Data Lead to a Relief Rally?

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API crude oil inventory 

The API (American Petroleum Institute) will release its weekly crude oil inventory report today. Last week, the API report stated that the US commercial crude oil inventory had fallen by 5.6 MMbbls (million barrels) for the week ending January 1, 2016. On the other hand, the crude oil inventory at Cushing, Oklahoma, rose by 1.4 MMbbls for the week ending January 1.

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EIA crude oil inventory

Traders closely watch the API inventory, as it is a precursor to the EIA’s (U.S. Energy Information Administration) weekly petroleum status report. The EIA is scheduled to release its weekly crude oil inventory report tomorrow. Last week’s report showed that the crude oil inventory had fallen by 5.1 MMbbls to 482.3 MMbbls for the week ending January 1, 2016. However, the gasoline inventory rose by 10.6 MMbbls to 232 MMbbls, and the distillate inventory rose by 6.3 MMbbls to 159.4 MMbbls for the same period. To learn more about the gasoline and distillate inventories, read Record Surge in Gasoline and Distillate Inventories.

Currently, the US commercial crude oil inventory is 26% more than last year’s level of 382 MMbbls. The record US crude oil inventory and rising refined products inventory will continue to put pressure on the oil market. However, the unprecedented fall in crude oil inventory due to winter demand could benefit the oil market with a relief rally.

Meanwhile, record US inventories and the wider contango market benefit the margins of oil tankers such as Teekay Tankers (TNK), Frontline (FRO), Nordic American Tankers (NAT), DHT Holdings (DHT), and Euronav (EURN). However, lower prices are weighing on oil producers.

The roller-coaster ride in the oil and gas market also impacts ETFs and ETNs like the Vanguard Energy ETF (VDE), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), and the VelocityShares 3x Long Crude Oil ETN (UWTI).

Read the next part of this series to learn how China is creating a crack in the global crude oil market.

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