Crude Oil Market: Is This the Beginning of an Oil Market Crash?
(Continued from Prior Part)
Crude oil inventory report
The EIA (U.S. Energy Information Administration) will publish the weekly US commercial crude oil inventory report on May 20, 2015, at 10:30 AM. Last week, the EIA data showed that the weekly stockpile dropped by 2.2 MMbbls (million barrels) to 484.8 MMbbls for the week ending May 8, 2015.
US inventories were at 487 MMbbls the previous week. The inventories are at the highest level since 1930. The current inventories are 100 MMbbls more than the levels last year. The record inventories will put pressure on oil prices.
Bloomberg surveys suggest that weekly crude oil inventories declined by 1.75 MMbbls for the week ending May 15. This was a 0.3% decline week-over-week. Refinery utilization is expected to increase by 0.3% to 91.5% for the week ending May 15. Gasoline and distillate stockpiles are expected to increase by 650,000 barrels and 400,000 barrels for the same period.
API inventory report
Yesterday, the API (American Petroleum Institute) reported that weekly crude oil inventories dropped by 5.2 MMbbls for the week ending May 15. The EIA’s crude oil inventory report is scheduled to be released today. If it’s in line with the API data, we might expect crude oil prices to rise. A worse-than-expected decline in crude oil inventory data generally supports crude oil prices.
As stated above, the market estimated a decline of 1.75 MMbbls for the US inventory. API sources added that inventories at Cushing, Oklahoma—the futures delivery point for crude oil—also declined by 217,000 barrels for the week ending May 15.
EIA sources reported that weekly crude oil production in the US rose by 5,000 bpd (barrels per day) to 9.37 MMbpd (million barrels per day) for the week ending May 8. The US oil production increased for the second time in the last five weeks. This will negatively impact oil prices.
Crude oil’s slump impacts upstream companies like Bonanza Creek Energy (BCEI), Diamondback Energy (FANG), and Bill Barrett (BBG). They account for 4.87% of the SPDR Oil and Gas ETF (XOP). These companies have a crude oil production mix that’s more than 46% of their total production.
Energy ETFs like the Energy Select Sector SPDR Fund (XLE) and XOP followed the direction of WTI crude oil prices and declined in yesterday’s trade.
Continue to Prior Part
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