30 Mar

US Crude Oil Inventories Hit a New Record: What’s Next?

WRITTEN BY Gordon Kristopher

Crude oil prices 

West Texas Intermediate crude oil (ERY) (IXC) (USL) futures contracts for May delivery fell 0.1% to $49.5 per barrel in electronic trading at 4:45 AM EST on March 30, 2017.

Prices are near a three-week high. Meanwhile, broader markets like the S&P 500 (SPY) (SPX-INDEX) and Dow Jones are near all-time highs. Bullish momentum in the US stock market could support oil demand and oil prices. The US is the largest oil consumer.

Moves in crude oil prices impact oil and gas producers’ earnings like Noble Energy (NBL), Continental Resources (CLR), Warren Resources (WRES), and Goodrich Petroleum (GDP). For more on crude oil prices and drivers, read Part 1 of this series.

US Crude Oil Inventories Hit a New Record: What’s Next?

EIA’s crude oil inventories 

The EIA (U.S. Energy Information Administration) reported that US crude oil inventories rose by 0.9 MMbbls (million barrels) to 534 MMbbls from March 17–24, 2017. Inventories rose 0.2% week-over-week and 6% year-over-year. US crude oil inventories are at the highest level ever.

A Reuters survey estimated that US crude oil inventories would have risen by 1.4 MMbbls from March 17–24, 2017. A less-than-expected rise in US crude oil inventories supported crude oil (PXI) (XES) (SCO) futures on March 29, 2017. For more on crude oil prices, read Part 1 in this series. In Part 4, we’ll see why US crude oil inventories rose.

Impact of US crude oil inventories  

US crude oil inventories are above their five-year range. US crude oil inventories have risen by ~55 MMbbls, or ~10%, in the last 13 weeks. Crude oil prices fell ~10% during this period. Record crude oil inventories would pressure crude oil (XLE) (IYE) prices. US crude oil inventories are the second-biggest bearish catalyst for crude oil prices after US crude oil production.

In the next part of this series, we’ll take a look at US crude oil production.

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