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Which Catalysts Could Push Crude Oil Prices Higher?

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Crude oil inventories 

On July 24, the API (American Petroleum Institute) released its oil inventory report after the crude oil futures settled on NYMEX. The API reported that US crude oil inventories fell by 3.2 MMbbls (million barrels) to 407.6 MMbbls on July 13–20.

A Reuters survey estimates that US oil inventories could have declined by 2.3 MMbbls during the same period. The U.S. Energy Information Administration is scheduled to release its oil inventory report on July 25.

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Drivers for crude oil futures 

September WTI oil (USO) futures rose 0.93% to $68.52 per barrel on July 24. Oil’s bullish drivers include:

  • Cushing crude oil inventories are expected to fall for the tenth consecutive week for the week ending July 20. The API estimates that Cushing crude oil inventories fell by 0.8 MMbbls on July 13–20.
  • The Chinese government is expected to boost government spending through tax breaks and special bonds for infrastructure investment. Infrastructure spending could boost the crude oil demand from China. In the past, the rise in infrastructure spending from China boosted the oil demand.
  • The war of words between President Trump and Iran’s president supported oil prices due to potential supply disruptions. According to the Wall Street Journal, Iran’s crude oil exports could fall to one million barrels per day after November.

The Energy Select Sector SPDR ETF (XLE) rose ~1.3% on July 24. The companies in XLE produce crude oil and natural gas and provide other energy-related services.

Pioneer Natural Resources (PXD), EOG Resources (EOG), Chevron (CVX), and Noble Energy (NBL) rose 3.23%, 2.3%, 2.1%, and 2%, respectively, on July 24. These stocks were the top percentage gainers in XLE’s holdings on the same day. These stocks account for 24.8% of XLE’s holdings.

EIA’s inventory data 

A larger-than-expected drop in US oil inventories reported by the EIA on July 25 could support oil prices. However, an unexpected rise in the inventories could pressure oil prices.

Next, we’ll discuss the API’s estimates for US gasoline and distillate inventories.

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