US Crude Oil Inventories Hit a 2018 High

The EIA’s US crude oil inventories  

On May 2, the EIA released its weekly crude oil inventory report. It reported that US crude oil inventories increased by 6.2 MMbbls (million barrels) to 435.9 MMbbls from April 20 to 27. However, inventories declined by 91.8 MMbbls or ~17.4% from a year ago.

A Reuters poll had estimated that US crude oil inventories could have increased by 0.7 MMbbls from April 20 to 27. Inventories are at their highest level since December 2017.

US Crude Oil Inventories Hit a 2018 High

US crude oil futures rose on May 2 despite the larger-than-expected rise in US crude oil inventories. We discussed the bullish drivers of crude oil in the previous part of this series. June US crude oil futures rose 1% to $67.93 per barrel.

The Energy Select Sector SPDR ETF (XLE) rose ~0.4% to $73.66. XLE aims to track the performance of the Energy Select Sector Index. Devon Energy (DVN), Marathon Petroleum (MPC), and Andeavor (ANDV) account for ~5.5% of XLE’s holdings. These stocks rose ~5.6%, 4%, and ~3.8%, respectively, on May 2. These stocks were the top percentage gainers in XLE’s holdings.

Refinery demand and imports  

According to the EIA, US crude oil refinery demand decreased ~0.4% to 16,561,000 bpd (barrels per day) from April 20 to 27. Refinery demand also decreased by 616,000 bpd or ~3.5% from a year ago.

US crude oil imports increased 1% to 8,549,000 bpd from April 20 to 27. Imports also increased by 285,000 bpd or ~3.4% from a year ago.

Impact 

US oil inventories dropped ~12% in 2017 while WTI oil prices increased 12.4%. Inventories fell ~18.5% from the record high on March 31, 2017. WTI oil futures have increased ~34.2% since then.  US oil inventories were ~2.3% below their five-year average, which is bullish for US oil prices. If US oil inventories rise toward the five-year average, it’s bearish for crude oil prices.

Next in this series, we’ll cover US crude oil production.