Crude oil inventories act as a leading indicator of market sentiment and can influence the behavior of investors and traders. High inventories may lead to bearish sentiment, prompting investors to sell oil-related assets, such as energy stocks, futures, or exchange-traded funds (ETFs). Conversely, low inventories can create bullish sentiment and attract buying interest.
The US Energy Information Administration revealed in a report on Wednesday that U.S. crude oil inventories fell by 12.2 million barrels to 448.5 million barrels in the week ended June 28.
The country’s crude refinery inputs averaged 16.8 million barrels per day, up 260,000 barrels per day from the previous week’s average. Refineries operated at 93.5 percent of capacity, while gasoline production rose to an average of 10.1 million barrels per day.
Crude oil imports to the United States averaged 6.5 million bpd, 65,000 bpd lower than the previous week. Total commercial oil inventories fell by 13 million barrels.
Crude oil inventories provide insights into the balance between supply and demand in the oil market. When inventories are high or rising, it indicates a state of oversupply, suggesting that there is more oil available than current demand requires. In such cases, prices tend to fall as producers may lower prices to sell excess inventory. Conversely, if inventories are low or low, this indicates a potential shortage of supply, which could lead to upward pressure on prices as buyers compete for limited supply.
Oil rises after reduced report on US crude inventories
Oil futures rose on Wednesday after U.S. data revealed a sharp drop in crude oil inventories, after prices retreated in the previous session from two-month highs.
Brent crude futures for the month of the nearest September 24 maturity were trading at $86.38 a barrel compared with Tuesday’s settlement at $86.24 a barrel.
Meanwhile, WTI was trading on the New York Stock Exchange on August 24 at $82.97 per barrel, versus Tuesday’s settlement at $82.81 per barrel.
However, the market’s reaction to the latest Energy Information Administration (EIA) report was relatively disappointing, and came after commercial inventories fell by 12.157 million barrels during the week ended June 28.
Markets have already risen in previous trading after a report by the American Petroleum Institute revealed that crude oil inventories fell by more than 9 million barrels last week, which analysts said left little room for further rise after the release of the Energy Information Administration.
Indexes started the week on a steady basis, buoyed by rising geopolitical risks and concerns about the active hurricane season, with Beryl declared the first category five superstorm on record.
OPEC released its monthly oil market report, which includes analysis and forecasts based on its assessment of global oil market conditions, including crude oil inventories. They provide insights into supply and demand balances, production levels, consumption patterns, and the impact of inventory changes on oil prices. OPEC’s analysis often takes into account factors such as geopolitical developments, production agreements between member countries, and indicators.
The importance of crude oil inventories in shaping energy markets
Crude oil inventories refer to the stock or supply of crude oil held by designated countries, regions, or storage facilities. Represents the amount of crude oil that has been extracted from the ground but not yet refined or consumed.
Crude oil inventories are usually measured in barrels (barrels) or metric tons. They include crude oil found in storage tanks, pipelines and other storage infrastructure. Stocks can be classified into three main types :
Commercial inventory: held by oil companies, traders and refineries as part of their business operations. Commercial inventories provide a barrier against supply disruptions, enable companies to manage production and refining schedules, and meet customer demand. .
Strategic Petroleum Reserves (SPRs): Some countries hold strategic oil reserves, which are government-controlled crude oil stockpiles. These reserves are intended to provide a strategic supply cushion during emergencies., such as oil supply disruptions or geopolitical conflicts.
Industrial and operational inventory: This stock includes crude oil held by industries or sectors that need oil for their operations, such as airlines, shipping companies and power plants. They are often maintained to ensure a steady supply of oil for essential activities .
Crude oil inventories are closely monitored and reported by many organizations and agencies, including government agencies such as the U.S. Energy Information Administration (EIA) and the International Energy Agency (IEA). Inventory data is published regularly, which is an important factor in analyzing the dynamics of supply and demand and price movements in the oil market. Changes in inventories can affect oil prices and serve as indicators of market trends and economic activity.
