Cushing Inventories Fell for the Second Straight Week

Cushing inventories  

The U.S. Energy Information Administration estimates that Cushing inventories fell by 0.6 MMbbls (million barrels) to 35.5 MMbbls on May 18–25. The inventories fell for the second consecutive week. The inventories also declined 45% or by ~29.3 MMbbls from a year ago.

Inventories and US crude oil futures are usually inversely related. WTI crude oil futures have risen ~34.5% since May 25, 2017. The iShares Global Energy ETF (IXC) and the Energy Select Sector SPDR ETF (XLE) have risen ~20% and ~19%, respectively, since May 25, 2017. IXC targets to follow an index of global equities in the energy sector. XLE aims to follow the Energy Select Sector Index.

Cushing Inventories Fell for the Second Straight Week

Valero (VLO), Andeavor (ANDV), and Marathon Oil (MRO) account for 6.6% of XLE’s holdings. These stocks have risen ~99.3%, 79.8%, and 64.3%, respectively, since May 25, 2017. These stocks were the top percentage gainers in XLE’s portfolio during this period.

US crude oil inventories 

US crude oil inventories declined by ~3.6 MMbbls (million barrels) to 434.5 MMbbls on May 18–25. The inventories also declined by 78.2 MMbbls or ~15% from a year ago. The inventories declined ~19% from the record high reached during the week ending March 31, 2017. 

Impact

Cushing inventories dropped ~48.8% from the record high reached on April 7, 2017. If Cushing inventories decline more, it could be bullish for crude oil prices.

Next, we’ll discuss the US crude oil rig count.