US crude oil inventory data
According to the EIA’s (U.S. Energy Information Administration) report released on July 5, US crude oil inventories rose by ~1.2 MMbbls (million barrels) to ~417.9 MMbbls in the week ending June 29. The market expected a fall of 4.5 MMbbls based on a Bloomberg survey. On July 5, US crude oil August futures fell 1.6%.
In the week ending June 29, US crude oil inventories were 2% below their five-year average. In the previous week, the inventories were 4% lower than the five-year average. The difference is called the “inventories spread.” Oil prices and the inventories spread usually move inversely, as shown in the above chart. The contraction in the negative inventories spread in the week ending June 29 could have been a drag on oil prices.
Inventories spread, oil prices, and energy stocks
Since the release of the EIA’s data on July 5, US crude oil August futures have risen 1.2%. On July 5–9, Callon Petroleum (CPE), Carrizo Oil & Gas (CRZO), and Denbury Resources (DNR) rose 6.4%, 7.3%, and 9%, respectively—the outperformers on our list of oil-weighted stocks.
Since July 5, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the iShares US Oil & Gas Exploration & Production ETF (IEO) have risen ~4.5% and ~3.5%, respectively. These ETFs hold energy stocks.
Fall in inventory levels
A fall by more than ~6.3 MMbbls in US crude oil inventories in the week ending July 6 could help the inventories spread expand more into the negative territory. However, if the inventories don’t fall as much or the data show a build in inventory levels, US crude oil prices might fall.
The EIA is scheduled to announce its US crude oil inventory data for the week ending July 6 on July 11. In the past five years, US crude oil inventories have fallen by an average of ~6.4 MMbbls at this time of the year.