The U.S. Energy Information Administration (EIA) revealed in its report released Wednesday that commercial crude oil inventories in the United States, excluding Strategic Petroleum Reserve inventories, rose by 0.2 million barrels to 443.1 million barrels in the week ended April 18.
The country’s inventories are now about 5% below their five-year average at this time of year. U.S. crude refinery inputs averaged 15.9 million bpd during the corresponding week, 326,000 bpd higher than the previous week’s average.
Refineries operated at 88.1 percent of their operating capacity last week, while gasoline production rose, averaging 10.1 million barrels per day. Crude oil imports in the country averaged 5.6 million bpd last week, down 412,000 bpd. Total commercial oil inventories fell by 0.7 million barrels last week.
Imports of gasoline (including finished gasoline and gasoline mixing components) last week averaged 531,000 barrels per day, and distillate imports averaged 102,000 barrels per day.
Ready-made gasoline inventories rose, and mixer ingredient inventories fell last week. Distillate inventories fell by 1.9 million barrels last week, about 11 percent below their five-year average at this time of year. Propane/propylene inventories fell by 1.3 million barrels from last week, about 9 percent below their five-year average this time of year. Total commercial petroleum inventories fell by 2.1 million barrels last week.
The Energy Information Administration and the Organization of the Petroleum Exporting Countries provide regular updates on oil production rates, helping analysts estimate how much crude oil is entering the market. Factors such as new oil discoveries or production cuts or increases can significantly affect inventory levels
Why is the weekly report on US crude oil inventories important to energy market traders?
The weekly report on crude oil inventories in US dollars, issued by the US Energy Information Administration (EIA) or the American Petroleum Institute (API), is of great importance to traders in the energy market due to several key reasons:
1. Supply and demand indicators:
The data provides an overview of the supply and demand dynamics of the USoil market. Higher crude oil inventories generally indicate weak demand or oversupply, which could put downward pressure on USoil prices. Conversely, lower inventories indicate increased demand or potential supply disruptions, which could lead to higher USoil prices. Traders are watching these changes closely as they reflect shifts in the balance of supply and demand.
2. Market sentiment and price movements:
The report could cause spot price fluctuations in crude USoil futures and related markets. If reported inventory levels are above or below analysts’ expectations, this could lead to sudden price movements. For example, if inventories rise unexpectedly, traders may expect demand to decrease or oversupply in the market, prompting them to sell USoil positions, which could lead to lower prices. On the other hand, sudden stock drops can create bullish sentiment, leading to higher prices.
3. USOil Price Volatility:
Traders use the weekly inventory report to gauge potential volatility in the market. Large changes in inventory levels, especially when combined with geopolitical events or broader economic data, can indicate potential price fluctuations. These volatility offers opportunities for traders to take advantage of short-term market movements, but they also increase risk, requiring careful strategy and hedging.
How do analysts predict changes in US crude oil inventories, and what factors influence this outlook?
Analysts predict changes in crude oil inventories in US dollars by analyzing a range of factors that affect supply and demand in the oil market. Their forecast aims to estimate how much crude oil is likely to be stored at any given time and how external factors might affect these levels. Several key elements are taken into account when making these predictions, including:
Supply and production data:
Oil supply is one of the most important drivers of changes in crude oil inventories. Analysts are closely monitoring production levels in the United States and other major oil-producing countries. The Energy Information Administration and the Organization of the Petroleum Exporting Countries provide regular updates on oil production rates, helping analysts estimate how much crude oil is entering the market. Factors such as new oil discoveries or production cuts or increases can significantly affect inventory levels.
Factors affecting production expectations include:
- Changes in drilling activity (tracked by the number of Baker Hughes rigs).
- OPEC production agreements or cuts.
- Seasonal changes in oil production (for example, cold winters may increase demand for heating fuels).
- Technological advances in extraction methods, such as hydraulic fracturing.
Refining and infrastructure activity:
The level of refining activity is another determining factor affecting crude oil inventories. Refineries process crude oil and convert it into refined products such as gasoline, diesel and jet fuel. If refining operations are fully operational or increasing, this could reduce the amount of crude USoil stored, resulting in lower inventories. Conversely, if refinery utilization decreases (due to maintenance or operation issues), crude oil inventories may accumulate.
Analysts track refining production, which is the amount of crude USoil processed by crude oil refineries. High refining processes generally lead to lower crude USoil inventories.
