Oil inventories and their five-year average
In the week ending December 28, US crude oil inventories were 8% higher than their five-year average—one percentage point more than the previous week. Oil prices and the inventories spread usually move inversely.
If the inventories spread expands more 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 January 4, US crude oil February futures have risen 1.2%. Last week, China announced a dialogue with the US about the trade war, which might have supported oil prices. On January 4–7, oil-weighted stocks WPX Energy (WPX), Whiting Petroleum (WLL), and Callon Petroleum (CPE) rose 6.1%, 7.6%, and 7.8%, respectively, and outperformed their peers.
Fall in inventory levels
On January 9, the EIA is scheduled to announce its US crude oil inventory data for last week. A fall of more than ~7.2 MMbbls (million barrels) for the week ending on January 4 would help contract the inventories spread. However, a Reuters poll suggested a fall of 3.3 MMbbls in crude oil inventories. If the EIA data were in-line with Reuters’ poll, then the inventories spread would remain at a constant level, which might concern oil prices.