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Large Drop in US Crude Oil Inventories Helps Oil Bulls

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EIA’s US crude oil inventories  

On June 13, the EIA (U.S. Energy Information Administration) released its weekly crude oil inventory report. The EIA reported that US crude oil inventories decreased by 4.1 MMbbls (million barrels) to 432.4 MMbbls on June 1–8. The inventories decreased by 79.1 MMbbls or 15.5% from a year ago. A Reuters survey estimated that US crude oil inventories could have declined by 2.7 MMbbls on June 1–8.

July WTI crude oil futures rose 0.4% to $66.64 per barrel on June 13 due to the larger-than-expected drop in US crude oil inventories.

However, the Energy Select Sector SPDR ETF (XLE) fell 0.4% to $76.42 on June 13. The companies in XLE develop and produce crude oil and natural gas. The companies also provide drilling and other energy-related services.

The general bearish mood in the broad equity market pressured energy stocks to fall despite the rise in crude oil prices. TechnipFMC (FTI), Concho Resources (CXO), Baker Hughes, a GE Company (BHGE), and Cimarex Energy (XEC), account for 4% of XLE’s holdings. These stocks fell 1.9%, 1.7%, 1.4%, and 1.3%, respectively, on June 13. These stocks were the top percentage losses in XLE’s holdings on the same day.

Refinery demand and imports 

According to the EIA, US crude oil refinery demand increased by 136,000 bpd (barrels per day) to 17.5 MMbpd (million barrels per day) on June 1–8. The demand increased by 249,000 bpd or 1.4% from a year ago.

US crude oil imports decreased by 247,000 bpd to 8.1 MMbpd on June 1–8. However, the imports increased by 74,000 bpd or 1% from a year ago.

Impact 

US oil inventories fell 19.3% from the record high hit during the week ending March 31, 2017. Since then, WTI crude oil prices have increased 31.7%.

US crude oil inventories were 0.4% below their five-year average, which is bullish for WTI oil prices. If US crude oil inventories rise above the five-year average, it could be bearish for oil prices.

Next, we’ll discuss US crude oil production.

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