EIA’s Oil Inventory Data Might Limit Oil’s Upside

Oil inventories and their five-year average

In the week ending October 5, US crude oil inventories were at their five-year average—the same as the previous week. Oil prices and the inventories spread usually move inversely, as you can see in the following chart. If the inventories spread expands into the positive territory, it might drag oil prices in the coming weeks. The inventories spread is the difference between inventories and their five-year average.

EIA’s Oil Inventory Data Might Limit Oil’s Upside

Oil prices, energy stocks, and the inventories spread

Since the EIA (U.S. Energy Information Administration) data were released on October 11, US crude oil November futures have risen 1.1%. On October 11–15, oil-weighted stocks WPX Energy (WPX), Callon Petroleum (CPE), and Oasis Petroleum (OAS) rose 3.9%, 4%, and 4.3%, respectively, and outperformed their peers. Since October 11, the S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) each rose 0.8%. These indexes’ energy components are sensitive to oil prices.

Rise in inventory levels

On October 17, the EIA is scheduled to announce its US crude oil inventory data for last week. Any rise in the inventories above 1.9 MMbbls (million barrels) will likely push the inventories into the positive territory. A Reuters poll indicates a rise of ~1.1 MMbbls for the week ending on October 12. If the EIA’s report is in line with the Reuters poll, the inventories spread might remain at a constant level, which might limit oil’s upside.