uploads///API Reported versus Analysts Forecast

Will the EIA’s Petroleum Status Report Reflect Crude Inventory?


Jan. 27 2016, Updated 10:43 a.m. ET

Crude oil inventories

The API (American Petroleum Institute) released its weekly crude oil inventory report on Tuesday, January 26, 2016. It’s the precursor of the EIA’s[1. U.S. Energy Information Administration] report. It reported that the US crude oil inventories rose by 11.4 MMbbls (million barrels) for the week ending January 22, 2016. Analysts expected that inventories would rise by 3.5 MMbbls for that week.

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Refinery maintenance and lower distillate demand

The API report shows a continuous rise in crude oil inventories from the beginning of this year. The lower gasoline and distillate demand continuously added to the crude oil inventory builds. Also, gasoline demand is quite strong compared to the previous year, though mild weather plunged distillate demand. So, refinery runs have been lowered from 95% to around 91%, leading to lower demand for crude oil.

The production levels and imports of crude oil were quite stable for a long time even though demand is lower. This is one of the major contributors of crude oil inventory builds. Crude oil inventories rose last week as many refineries underwent summer maintenance and lower gasoline demand because of the winter season.

The rise in crude oil inventory levels could negatively impact the revenues of crude oil producers, raising the operational costs. This includes crude oil producers such as Apache (APA), Halcón Resources (HK), Anadarko Petroleum (APC), Marathon Oil (MRO), and Occidental Petroleum (OXY).

Occidental Petroleum accounts for 4.2% of the iShares US Energy ETF (IYE).

The EIA’s inventory data

The EIA reported a rise in crude oil inventories by 4.0 MMbbls for the week ending January 15, 2016, while the API reported 4.6 MMbbls for that week. So, the EIA’s report approximately reflected the figures of the API’s report. The lower gasoline and distillate demand will likely lead to a rise in crude oil inventories. So, it’s expected that the EIA will report large crude oil inventory builds for the week ending January 22, 2016.


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