Any Rise in the EIA’s Inventory Data Might Disappoint Oil Bulls

Changes in inventory levels

On March 20, the EIA (U.S. Energy Information Administration) is scheduled to announce last week’s US crude oil inventory data. Any fall could narrow the inventories spread. A fall would be welcomed by oil bulls. A Reuters poll suggests a fall of 0.77 MMbbls in oil inventories. If the EIA data are in line with the poll, then the inventories spread will contract by one percentage point.

Any Rise in the EIA’s Inventory Data Might Disappoint Oil Bulls

Oil inventories and their five-year average

In the week ending March 8, US crude oil inventories were 2% higher than their five-year average—two percentage points less than the previous week. Oil prices and the inventories spread usually move inversely. If the inventory spread contracts more, it could boost oil prices in the coming weeks. The inventories spread is the difference between oil inventories and their five-year average.

Oil prices and energy stocks

Since the EIA released its inventory data on March 13, US crude oil May futures have risen 1.3%. On March 13–18, oil-weighted stocks California Resources (CRC), Concho Resources (CXO), and Carrizo Oil & Gas (CRZO) rose 4.5%, 5%, and 9.4%, respectively, and outperformed their peers. The expansion in the inventories spread and a reduction in the global oil supply might have supported oil prices.

Since March 13, 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.