Oil inventories and their five-year average
In the week ending on June 14, US crude oil inventories were 7% higher than their five-year average—compared to the surplus of 8% to the five-year average the previous week.
Oil prices and the inventories spread usually move inversely. If the inventories spread contracts more, oil prices could see another rise. The inventories spread is the difference between oil inventories and their five-year average.
Oil prices and energy stocks
Since the EIA (U.S. Energy Information Administration) released its inventory data on June 19, US crude oil July futures have risen 7.3%. The contraction in the inventories spread and geopolitical tensions in the Middle East contributed to the rise in oil prices.
On June 19–24, oil-weighted stocks California Resources (CRC), Diamondback Energy (FANG), and Hess (HES) rose 3%, 3.4%, and 4.5%, respectively. They were among the outperformers. California Resources, Diamondback Energy, and Hess operate with a production mix of 74.4%, 84.7%, and 68.2% in commodities linked to oil prices. The change in the inventories spread will likely be important for these energy stocks.
Changes in inventory levels
On June 26, the EIA is scheduled to announce last week’s US crude oil inventory data. A fall of equal to or more than ~7 MMbbls (million barrels) could help the inventories spread contract. A Reuters poll suggests a fall of 2.9 MMbbls. If the EIA reports a figure that’s in line with the poll, the inventories spread will remain unchanged.