EIA Reports Bearish Inventory: WTI Crude Oil Prices Fall

(Continued from Prior Part)

The EIA (U.S. Energy Information Administration) estimates that US crude oil production remained flat at ~9.1 MMbpd (million barrels per day) in the week ended October 30, 2015, compared to the week ended October 23. This level is ~2% higher than last year’s level of ~8.9 MMbpd.

The four-week average production of 9.1 MMbpd through the week ended October 30 was ~1.7% higher than the corresponding period last year at ~8.9 MMbpd. The four-week average was flat week-over-week.

As you can see in the graph above, the four-week average production has been on a downtrend and has stayed flat recently. This suggests that the US shale-induced crude oil production boom is easing as a result of falling prices.

Lower production, meaning lower supply, should be bullish for WTI (West Texas Intermediate) crude oil prices (USO). Higher WTI prices are positive for crude oil producers such as Hess (HES), ConocoPhillips (COP), and EP Energy (EPE). Hess and ConocoPhillips are part of the Vanguard Energy ETF (VDE). Together, they account for ~6% of the fund.

However, MLPs such as MarkWest Energy Partners (MWE) stand to lose when production falls. These companies make money by transporting energy.

Net US crude oil imports fell by 89,000 bpd (barrels per day) to average ~6.9 MMbpd in the week ended October 30. The fall in imports was driven mainly by falling imports from Venezuela and Saudi Arabia. A fall in imports, meaning lower supplies, is bullish for WTI crude oil prices.

Imports were ~4% higher compared to last year’s levels during the same week. The four-week average of ~7.2 MMbpd through the week ended October 30 was ~0.8% lower than last year’s average. It was ~0.4% lower compared to the previous four-week average through October 23.

According to the EIA, crude oil production should average 9.2 MMbpd in 2015 and 8.9 MMbpd in 2016. The fall in 2016 is expected to be driven by weak crude oil prices.

Crude oil production averaged 8.7 MMbpd in 2014. The EIA forecasts average net crude oil imports of 6.8 MMbpd in 2015 and 7.0 MMbpd in 2016.

The EIA will release its next STEO (Short-Term Energy Outlook) on November 10.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - US Crude Oil Inventories Increased More Than Expected, WTI Down
• Part 3 - US Refinery Inputs Up in Week Ended October 30
• Part 4 - Week Ended October 30: Cushing Inventories Fell 3 Weeks in a Row