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EIA and API Crude Oil Inventory: Time for Collateral Damage

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API crude oil inventory report 

On March 1, 2016, the API (American Petroleum Institute) published its weekly crude oil inventory report. It reported that the US crude oil inventory rose by 9.9 MMbbls (million barrels) for the week ending February 26, 2016—compared to the build by 7.1 MMbbls for the week ending February 19, 2016. The US crude oil inventory rose for the sixth time in the last seven weeks. Read Cushing Crude Oil Inventory: More Heat for Oil Prices? to learn more about the Cushing crude oil inventory.

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EIA’s crude oil inventory report 

The API report is the precursor to the EIA’s (U.S. Energy Information Administration) crude oil inventory report. The EIA will release its weekly petroleum status report on March 2, 2016. Last week, the US crude oil inventory rose by 3.5 MMbbls for the week ending February 19, 2016. Market surveys from Reuters suggest that crude oil stocks could rise by 3.6 MMbbls for the week ending February 26, 2016. Gasoline and distillate stocks are expected to fall by 1.1 MMbbls and 1.2 MMbbls for the same period. Last week, gasoline and distillate stocks fell by 2.2 MMbbls and 1.7 MMbbls for the week ending February 19, 2016.

Impact

The consensus of a rise in crude oil stocks will have a negative impact on crude oil prices. The fall in refined products stocks is bullish for crude oil prices. Long-term oversupply concerns led to the rise in storage capacities. The increase in crude oil inventories led to the rise of crude oil storage utilization. For more on this, read How US Crude Oil Storage Utilization Has Reached 60% of Capacity. Also, read Crude Oil Storage Costs Rose 9 Times, US Crude Tests New Limits.

The volatility in crude oil prices impacts upstream players like Marathon Oil (MRO), Apache (APA), Devon Energy (DVN), Murphy Oil (MUR), and Continental Resources (CLR). It also impacts ETFs and ETNs such as the VelocityShares 3x Long Crude Oil ETN (UWTI), the Direxion Daily Energy Bull 3x Shares ETF (ERX), the First Trust Energy AlphaDEX Fund (FXN), and the iShares Global Energy ETF (IXC).

The record US crude oil inventory in land and sea and the contango market benefit oil storage and transportation companies like DCP Midstream Partners (DPM), Williams Companies (WMB), ONEOK (OKE), Spectra Energy (SE), Energy Transfer Partners (ETP), and Kinder Morgan (KMI).

In the next part of this series, we’ll discuss how the US crude oil inventory led to the emergence of rail cars as the new crude oil storage space.

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