A Large Fall in EIA Data Might Help Oil Prices to Rise

Oil inventories and their five-year average

In the week ending on December 21, US crude oil inventories were 7% higher than their five-year average—unchanged from the previous week. Oil prices and the inventories spread usually move inversely.

A Large Fall in EIA Data Might Help Oil Prices to Rise

If the inventories spread expands into the positive territory, it could drag oil prices down in the coming weeks. The inventories spread is the difference between oil inventories and their five-year average.

Oil prices, energy stocks, and the inventories spread

Since the latest EIA (U.S. Energy Information Administration) data were released on December 28, US crude oil February futures have risen 0.2%. On December 28–31, oil-weighted stocks Occidental Petroleum (OXY), Whiting Petroleum (WLL), and WPX Energy (WPX) rose 1.5%, 2.2%, and 2.8%, respectively, and outperformed their peers.

Since December 28, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) have risen 0.8% and 1.1%, respectively. These indexes’ energy components are sensitive to oil prices.

Fall in inventory levels

On January 4, the EIA is scheduled to announce its US crude oil inventory data for last week. A fall of more than ~8.4 MMbbls (million barrels) for the week ending on December 28 would help contract the inventories spread. The five-year average has also fallen by 4.1 MMbbls during this time of the year.