Crude inventory data
The API (American Petroleum Institute) reported that crude inventories rose by 6.2 MMbbls (million barrels) for the week ending April 8, 2016. Analysts polled by Platts forecast that the crude inventory could rise by just 1 MMbbls when the EIA reports the inventory data on April 13.
Inventory data play an important role in deciding crude oil prices. Inventory data reflect demand-supply dynamics. For example, the above graph shows the drop in crude oil prices in the week after the EIA (U.S. Energy Information Administration) reported higher inventory data on March 23, 2016. Crude oil already corrected around 60% from its June 2016 levels. Lately, the crude oil market has been more sensitive to the production freeze talk. So, even if the EIA inventory data show higher gains than expected, it could have a smaller impact on crude oil. Although the production freeze talk won’t lead to a reduction in crude oil production, it will at least limit the crude supply to certain levels. If the demand increases in the next one or two years, the excess supply problem would end. This would support the prices.
ETFs and upstream stock
In the past, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Energy Select Sector SPDR ETF (XLE) prices closely tracked crude oil future prices when inventory data are released. Oil and gas companies such as ConocoPhillips (COP), Oasis Petroleum (OAS), and Triangle Petroleum (TPLM) took price cues from inventory data in the past.