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What Could Limit the Crude Oil Price Rally?


Mar. 23 2016, Published 1:33 p.m. ET

API crude oil inventories 

The API (American Petroleum Institute) published its weekly petroleum status report on March 22, 2016. The API stated that the US crude oil inventory rose by 8.8 MMbbls (million barrels) for the week ending March 18, 2016. In contrast, Cushing crude oil stocks fell by 1.37 MMbbls (million barrels) for the same period.

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EIA crude oil inventories

The API crude oil inventory is a precursor to the EIA’s (U.S. Energy Information Administration) weekly petroleum status report. Tuesday’s API data are followed by Wednesday’s EIA inventory data. The EIA is scheduled will release its weekly crude petroleum status report on March 23, 2016. For the week ending March 11, the EIA reported that US crude oil inventories rose by 1.3 MMbbls to 523.2 MMbbls. The ups and downs in US crude oil stocks influence storage costs. To learn more, read Crude Oil Storage Costs Rose 9 Times, US Crude Tests New Limits and Record US Crude Oil Inventory Led to a New Storage Space.

Crude oil inventories’ estimates 

US crude oil inventories are 11% more than the 2015 levels during this period of the year. They’re also at the highest levels during this period of the year in the last 80 years. Market surveys from Reuters suggest that US crude oil inventories rose by 3.25 MMbbls for the week ending March 18. The expectation of rising US crude oil inventories could limit the crude oil price rally.

Record US crude oil inventories and the contango market support crude oil tanker companies like Frontline (FRO), Teekay Tankers (TNK), and DHT Holdings (DHT). For more information on US energy companies’ financial woes, read US Oil and Gas Companies’ Debt Exceeds $200 Billion and Crude Oil’s Total Cost of Production Impacts Major Oil Producers. 

Volatility in crude oil prices impacts upstream companies like Range Resources (RRC), Bonanza Creek Energy (BCEI), WPX Energy (WPX), and Triangle Petroleum (TPLM). It also influences the ProShares Ultra Bloomberg Crude Oil ETF (UCO), the iShares U.S. Energy ETF (IYE), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), and the Fidelity MSCI Energy (FENY).

Read the next part of the series to learn more about gasoline and distillate inventories.


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