19 Dec

Oil Traders Track OECD’s Crude Oil Inventories

WRITTEN BY Gordon Kristopher FEATURED IN Commodities

OECD’s crude oil inventories 

The EIA estimates that OECD’s (Organisation for Economic Cooperation and Development) oil inventories fell by 2.5 MMbbls (million barrels) to 2,953.2 MMbbls in November 2017—compared to the previous month. OECD’s crude oil inventories fell 0.1% month-over-month and by 60.4 MMbbls or 2% from the same period in 2016. The inventories fell by 95.3 MMbbls or 3.1% since January 2017 due to ongoing production cuts and improving global crude oil demand. The fall in OECD’s crude oil inventories is bullish for oil (BNO) (USO) (UCO) prices. Brent crude (BNO) oil prices rose ~15% between January 2017 and November 2017.

Oil Traders Track OECD’s Crude Oil Inventories

OECD crude oil inventories peaked 

The above chart shows that OECD’s crude oil inventories are usually inversely related to crude oil. OECD’s oil inventories hit 3,090 MMbbls in July 2016, which was the highest level ever. Brent oil prices averaged ~$45 per barrel in July 2016. Prices recovered from a 13-year low hit in early 2016.

Estimates

The EIA released its STEO (Short-Term Energy Outlook) report on December 12, 2017. It estimates that OECD’s oil inventories will average 2,985 MMbbls in 2018—2.3% lower than the estimates from the November STEO report because of ongoing production cuts and improving demand. The decline in OECD’s crude oil inventories is bullish for oil (UWT) (DWT) prices. Higher oil prices favor oil producers (FXN) like Rosneft, Shell (RDS.A), and Cobalt International Energy (CIE).

OECD’s oil inventories averaged 2,967 MMbbls in 2015 and 2016. The inventories are expected to average 2,942 MMbbls in 2017.

Impact

OECD’s crude oil inventories were near a 25-month low. They have fallen 4.4% since the all-time high in July 2016. Ongoing production cuts could help draw down global oil inventories. The fall in OECD’s oil inventories could support oil (DBO) (SCO) prices.

Next, we’ll discuss US gasoline demand.

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