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API Crude Oil Inventory: Up, Up, Up, and Up Again

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API crude oil inventory report 

On February 9, 2016, the API (American Petroleum Institute) published its weekly crude oil inventory report. The US industry group reported that US crude oil inventory rose by 2.4 MMbbls (million barrels) for the week ended February 5, 2016. US crude oil inventory also rose by 3.8 MMbbls for the week ended January 29, 2016. API crude oil inventory rose for the fourth straight week. Why?

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EIA’s crude oil inventory 

US crude oil inventory might have increased in the week ended February 5, 2016, for a number of reasons:

  • a mild winter
  • a rise in US crude oil imports
  • weak refinery demand due to the refinery maintenance season

API data are followed by the EIA (U.S. Energy Information Administration) in its weekly petroleum status report. The EIA’s crude oil inventory report is expected to be released on February 10, 2016. Last week, crude oil inventory rose by 7.8 MMbbls to 502.7 MMbbls for the week ended January 29, 2016.

To learn more about gasoline and distillate inventory, read the next part of this series. Market surveys from Reuters suggest that crude oil inventory could rise by 3.6 MMbbls for the week ended February 5, 2016. Bloomberg surveys suggest crude oil inventory could rise by 3.2 MMbbls for the same period.

The rise in crude oil inventory suggests that either supply is more or demand is less. So it will negatively affect crude oil prices. The current US crude oil inventory is 36% more than the five-year seasonal average. You can read how rising crude oil inventory affects crude oil storage costs in the article Crude Oil Storage Costs Rose 9 Times, US Crude Tests New Limits.

The record US inventory and consensus of rising crude oil inventory will negatively affect crude oil prices.

The impact

Long-term lower oil prices affect US upstream players such as Energy XXI (EXXI) and Halcon Resources (HK). But rising supplies increase oil volumes and benefit oil and gas storage and transportation companies such as Williams Companies (WMB), Spectra Energy (SE), Oneok (OKE), and Kinder Morgan (KMI). They also benefit oil tankers such as Nordic American Tankers (NAT) and Teekay Tankers (TNK).

ETFs and ETNs such as the VelocityShares 3x Long Crude Oil ETN (UWTI), the United States Oil Fund (USO), the ProShares Ultra Bloomberg Crude Oil ETF (UCO), and the iPath S&P GSCI Crude Oil Total Return ETN (OIL) are influenced by the volatility in the oil market.

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