US Crude Oil Inventories Weigh on Oil Prices
EIA’s US crude oil inventories
On March 7, 2018, the EIA released its weekly crude oil inventory report. The EIA reported that US crude oil inventories increased by 2.4 MMbbls (million barrels) to 425.9 MMbbls on February 23–March 2, 2018. However, the inventories declined by 102.5 MMbbls or 19.4% YoY (year-over-year).
Reuters estimated that US crude oil inventories could have increased by 2.7 MMbbls on February 23–March 2, 2018. An increase in the inventories pressured oil prices on March 7, 2018. WTI oil futures contracts fell 2.3% to $61.15 per barrel on March 7, 2018.
The Energy Select Sector SPDR ETF (XLE) decreased 0.7% to 67.1 on March 7, 2018, while the iShares U.S. Energy ETF (IXC) fell 0.8% to 33.5 on the same day. These funds have exposure to oil and gas companies.
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Refinery demand, imports, and exports
According to the EIA, US crude oil refinery demand increased 0.3% to 15,935,000 bpd (barrels per day) on February 23–March 2, 2018. The demand also increased by 443,000 bpd or 2.8% YoY.
US crude oil imports increased 10% to 8,003,000 bpd on February 23–March 2, 2018. However, the imports decreased by 147,000 bpd or ~1.8% YoY.
US crude oil exports increased 3.6% to 1,498,000 bpd on February 23–March 2, 2018. The exports also increased by 601,000 bpd or 67% YoY. Changes in oil supply and demand impact inventories.
US oil prices rose 12.4% in 2017, while US oil inventories dropped ~12% during the same period. Inventories declined ~20.5% from the peak hit on March 31, 2017. WTI oil prices have risen 21% since March 31, 2017.
The ProShares Ultra Bloomberg Crude Oil ETF (UCO) and the VelocityShares 3x Long Crude Oil ETN (UWT) have increased ~29% and ~31%, respectively, since March 31, 2017. UCO aims to provide twice the daily return of an index of WTI crude futures contracts. UWT aims to provide the daily return of the S&P GSCI Crude Oil Index ER.
US oil inventories are 0.8% above their five-year average, which is bearish for oil prices. If the difference drops, it’s a bullish sign for oil prices.
Next, we’ll discuss US oil production.