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Record US Crude Oil Inventories Could Impact the Oil Market

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Crude oil prices 

WTI (West Texas Intermediate) crude oil (FENY) (XES) (FXN) futures contracts for May delivery fell 0.3% and were trading at $50.1 per barrel in electronic trade at 5:35 AM EST on April 4, 2017. Prices are trading near a one-month high. Likewise, broader markets such as the S&P 500 (SPY) (SPX-INDEX) and the NASDAQ are near all-time highs. Bullish momentum in the US stock market could support oil demand and oil prices. The US is the largest crude oil consumer. For more on crude oil prices, read Part 1 of this series.

Higher crude oil prices have a positive impact on oil and gas producers’ earnings like Marathon Oil (MRO), Chevron (CVX), QEP Resources (QEP), and Synergy Resources (SYRG).

API’s crude oil inventories 

On April 4, 2017, the API (American Petroleum Institute) will release its weekly crude oil inventory report. A market survey estimates that US crude oil inventories could have fallen by 0.5 MMbbls from March 24–31, 2017. A fall in crude oil inventories could support US crude oil (USL) (UCO) (SCO) prices.

EIA’s crude oil inventories 

The API’s report will be followed by the EIA’s (U.S. Energy Information Administration) weekly crude oil inventory report for the week ending March 31, 2017. The report will be released on April 5, 2017, at 10:30 AM EST.

For the week ending March 24, 2017, the EIA reported that US crude oil inventories rose by 0.9 MMbbls (million barrels) to 534 MMbbls. US crude oil inventories are at an all-time high. Read US Crude Oil Inventories Hit a New Record: What’s Next? for more details. 

Impact of US crude oil inventories 

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 (PXI) (XLE) prices. Record crude oil inventories might be responsible for delayed rebalancing the crude oil market despite major oil producers’ production cut deal.

In the next part of this series, we’ll look at how OPEC’s crude oil production impacts crude oil prices.

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