How the Crude Inventory Report Could Impact Oil Prices

Today, at 11:46 AM EST, US crude oil prices were up 0.7% from the last trading session. The API (American Petroleum Institute) could report a rise of 1.5 MMbbls (million barrels) in crude oil inventories later in the day, based on the Reuters poll.

Moreover, the Reuters poll estimated a fall of 1 MMbbls in gasoline inventories. Any unexpected buildup in the API inventory report could limit oil’s upside.

How the Crude Inventory Report Could Impact Oil Prices

Why are oil prices rising?

The rise in oil prices could be due to Fed Chair Jerome Powell’s statement before the Joint Economic Committee. As reported by Reuters today, Powell expects a “sustained expansion” in the US economy. Economic growth is a crucial influence on oil prices.

On November 13, Mohammed Barkindo, the Secretary General of OPEC, noted during a CNBC interview, “Here in ADIPEC, talking to a number of producers, especially in the shale basins, there is a growing concern by themselves that the slowdown is almost graduating into a fast deceleration.”

Barkindo’s statement might bring relief to oil’s bulls. Last week, the US oil rig count was at the lowest level since April 2017. This trend reflects a slowdown in drilling activities in the US energy sector. OPEC’s World Oil Outlook report had already outlined the impact of rising US shale oil production on global oil supplies. To learn more, please read OPEC and EIA Bring No Relief for Crude Oil Prices.

In the last few years, rising US oil production is a key reason for the subdued crude oil prices. In early 2016, US crude oil prices were at a multiyear low. At that time, the fight for market share between OPEC and US shale oil producers had impacted the oil market.

OPEC’s meeting

With respect to next month’s OPEC+ meeting, Barkindo added, “It is very premature at the moment, despite the fact that we’re just weeks away from the conference.” This meeting is an important influence on crude oil prices, as is the extension of the production cut agreement until the end of 2020.

The production cut agreement of 1.2 MMbpd (million barrels per day) is valid until March 2020. Moreover, if the OPEC+ members decide to increase the magnitude of the production cut, oil prices could rise. To learn more about the production cut deal, please read OPEC’s Cut: How Long Oil’s U-Turn Might Continue.

EIA data

On November 14, the EIA (US Energy Information Administration) plans to release its inventory report. The Reuters poll estimated a rise of 1.649 MMbbls in the EIA’s crude oil inventories for the week ended November 8.

Moreover, the Reuters poll forecasts that gasoline inventories might decline by 1.2 MMbbls in the EIA report. The United States Oil Fund LP (USO), which tracks WTI crude oil futures, is generally sensitive to the EIA inventory report.