For the week ending December 29, 2017, US crude oil inventories were at 424.5 MMbbls (million barrels)—a fall of 7.4 MMbbls based on the EIA (U.S. Energy Information Administration) data released on January 4, 2018. It was 2.2 MMbbls more than the market’s expected fall. On the same day, US crude oil prices rose 0.6%.
US crude oil inventories nearing or falling below their five-year average could boost oil (UCO) (BNO) prices. In the week ending December 29, 2017, this difference or the “inventories spread” was at 9.1%—10 basis points below the level the previous week. Inventories are ~9% above their five-year average, but the spread is falling. On December 1–29, 2017, the inventories spread or the difference between oil inventories and their five-year average narrowed continuously. Since December 1, 2017, US crude oil (OIIL) (USL) (DBO) prices have risen 5.8%. After the EIA’s recent data on January 4, 2018, US crude oil prices have only fallen 0.5%. An additional fall in the inventories spread could be important for oil bulls.
What’s the required fall in US oil inventories?
In the week ending January 5, 2018, a fall of more than ~0.65 MMbbls would reduce the inventories spread and could help oil prices reach a new three-year high. On January 8, 2018, US crude oil (USO) (USL) February 2018 futures were 0.5% below their three-year high. The EIA will report the data on January 10, 2018. The data will be important for oil prices.