Oil inventories and their five-year average
In the week ending on June 7, US crude oil inventories were 8% higher than their five-year average—compared to the surplus of 6% to the five-year average they achieved the previous week.
Oil prices and the inventories spread usually move inversely. If the inventories spread expands more into the positive territory, oil prices could see trouble 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 (U.S. Energy Information Administration) released its inventory data on June 12, US crude oil July futures have risen 1.5%. The attack on tankers in the Middle East might be behind the rise.
On June 12–19, oil-weighted stocks Oasis Petroleum (OAS), California Resources (CRC), and Denbury Resources (DNR) rose 4.1%, 6.3%, and 10.5%, respectively. They were among the outperformers. Oasis Petroleum, California Resources, and Denbury Resources operate with a production mix of 72%, 74.4%, and 97% in commodities linked to oil prices. The change in the inventories spread would likely be important for these energy stocks.
Changes in inventory levels
On June 19, the EIA is scheduled to announce last week’s US crude oil inventory data. A fall of equal to or more than 7.1 MMbbls (million barrels) could help the inventories spread contract. A Reuters poll suggests a fall of 2.033 MMbbls. If the EIA reports a figure that’s in line with the poll, the inventories spread will remain unchanged.