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How the Inventories Spread Is Affecting Crude Oil

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Oil inventory data

In the week ended October 20, 2017, US commercial crude oil inventories rose by 0.9 MMbbls (million barrels) to 457.3 MMbbls. However, oil inventories have fallen 15.5 MMbbls since the week ended September 15, 2017. The fall in US crude oil stockpiles was followed by a 9% rise in US crude oil futures during this period.

Inventories spread

If US crude oil inventories exceed their five-year average, it could be a concern for oil (USL) (BNO) prices. Moreover, when the difference (or the inventories spread) contracts, it could be a bullish sign for oil prices.

In the week ended October 20, 2017, the inventories spread was at 16.6%, one percentage point below the week before. Since the release of the EIA inventory data on October 25, 2017, US crude oil (UCO) (OIIL) (DBO) futures have risen 4.2%.

Market forecast

The market expects a fall of 1.5 MMbbls in US crude oil stockpiles for the week ended October 27, 2017. The API (American Petroleum Institute) reported a fall of 5.1 MMbbls in US crude oil inventories for the same week.

The EIA will report its oil inventory data on November 1, 2017. A rise of up to ~5 MMbbls won’t increase the inventories spread. But, any drop in the inventory could decrease the inventories spread and could help US crude oil to rise further.

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