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US and OECD’s Crude Oil Inventories Could Impact Oil’s Price Rally

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OECD’s crude oil inventories 

The EIA estimated that OECD’s (Organisation for Economic Cooperation and Development) oil inventories averaged 3,030 MMbbls (million barrels) in 2016. OECD’s oil inventories fell 1.2% and averaged 2,993 MMbbls in 2017. The decline in OECD’s crude oil inventories was bullish for oil (UCO) (SCO) prices.

The inventories fell 4.6% between January 2017 and December 2017 due to production cuts and improving global oil demand. Brent crude (BNO) (USO) oil prices rose ~18% during the same period.

OECD crude oil inventories record 

OECD’s oil inventories tested 3,093 MMbbls in July 2016—the highest level ever. Brent oil (BNO) prices averaged ~$45 per barrel in July 2016. OECD’s oil inventories have declined 6% since July 2016. Brent crude oil has increased ~55% since July 2016.

US crude oil inventories 

US crude oil inventories decreased by 1.1 MMbbls to 411.6 MMbbls on January 12–19, 2018. They also fell ~12% in 2017. However, US oil prices increased 12.4% in 2017. US crude oil inventories declined ~23.1% from their peak. If the momentum continues in 2018, it could have a positive impact on oil (USO) prices. Higher oil prices benefit oil producers (FENY) (FXN) like BP (BP), Rosneft, PDC Energy (PDCE), ConocoPhillips (COP), and Sanchez Energy (SN).

Impact  

The EIA estimates that OECD’s oil inventories could decline 1.4% and average 2,952 MMbbls in 2018. Production cuts could draw down the US and global crude oil inventories in 2018, which is bullish for oil (DWT) (UWT) prices.

However, the EIA estimates that global crude oil inventories could rise in 2019, which is bearish for oil prices.

Next, we’ll discuss the biggest threat to crude oil prices in 2018.

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