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Will Any Fall in EIA Data Substantiate Oil’s Upside?

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Oil inventories and their five-year average

In the week ending May 10, US crude oil inventories were 2% above their five-year average—compared to on par with their five-year average the previous week. However, in the week ending April 12, US crude oil inventories were 2% below their five-year average.

Oil prices and the inventories spread usually move inversely. If the inventories fall back into the negative territory like we saw in April, they could boost oil prices in the coming weeks. The inventories spread is the difference between oil inventories and their five-year average.

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Oil prices and energy stocks

Since the EIA released its inventory data on May 15, US crude oil June futures have risen 1.6% due to rising geopolitical tensions in the Middle East. On May 15–20, oil-weighted stocks Hess (HES), ConocoPhillips (COP), and California Resources (CRC) rose 0.4%, 0.7%, and 6.5%, respectively, and were among the outperformers.

Since May 15, the S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) have returned -0.4% and 0.1%, respectively. These indexes’ energy components are sensitive to oil prices.

Changes in inventory levels

On May 22, the EIA is scheduled to announce last week’s US crude oil inventory data. A Reuters poll suggests a fall of 3 million barrels. If the EIA reports a figure in line with the poll, the inventories spread would rise to 3.2%.

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