How Will Rising Crude Oil Inventories Affect Prices?



US crude oil inventories

According to the EIA’s (U.S. Energy Information Administration) report on August 10, 2016, US crude oil inventories rose by 1.1 MMbbls (million barrels) in the week ended August 5, 2016, compared to an increase of 1.4 MMbbls in the previous week. It was the third consecutive week of rises in crude oil inventories. The markets expected a fall of 1.5 MMbbls, so this figure didn’t meet the expectations.

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What the crude oil inventories indicate

In the last three weeks, we saw that the crude oil (BNO) (UWTI) (USO) inventories rose more than markets expected. The rising crude oil inventories are indicating that the supply glut situation is slowly increasing. The crude oil prices are also struggling in the range of $40–$44 per barrel. After the crude oil inventory report on Wednesday, August 10, 2016, crude oil prices fell nearly 2.7%. However, the weaker dollar helped crude oil recover from its losses.

On Friday, August 12, 2016, the US retail sales data for July came out. Retail sales didn’t show any growth in July 2016. The poor economic data are affecting the sentiment towards the economy (QQQ) (IWM) (IVV) as well as the movement of the US dollar index. The PowerShares DB US Dollar Bullish ETF (UUP), which tracks the performance of the US dollar index, fell 0.22% after the announcement of the US retail sales data. The weaker dollar is supporting crude oil movements.

The ongoing geopolitical issues in the Middle East are affecting the movement of crude oil (UCO). However, the consumption of crude oil is also increasing.

In the next part of this series, we’ll analyze China’s retail sales in July.


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