EIA And API Oil Data Differ Yet Again, As Oil Prices Fall

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Includes: USO
by: Gaurav Agnihotri

Summary

EIA reported a 1.7 million barrel increase in the U.S commercial crude oil inventories for the week ending July 22, 2016.

API came up with its own oil data and reported a crude oil inventory draw-down of 800,000 barrels for the week ending July 22, 2016.

This is not the first time when API and EIA came up with contrasting data.

Thanks to a weaker U.S dollar, oil prices increased slightly on Thursday with WTI (WTI) and Brent trading at $42.06 and $43.62 at the time of writing this article. This increase came after the U.S crude futures tanked by more than 2% (at a 3 month low level) as EIA reported a 'surprise' build up in U.S oil inventories. It has been seen that EIA and API contradict each quite often. This week was no different, as API reported a drawdown in U.S oil inventories and left the markets confused.

What EIA says?

In its weekly petroleum report, EIA reported a 1.7 million barrel increase in the U.S commercial crude oil inventories for the week ending July 22, 2016. At 521.1 million barrels, U.S crude oil inventories were at historically high levels for this time of the year. On the other hand, gasoline inventories increased by 500,000 barrels and were well above their average range. The U.S gasoline stocks, which have now increased 5 times in the last 6 weeks as per EIA, are currently at their highest seasonal levels since 1990 and are responsible for the current oil price slump. Even distillate fuel inventories, which decreased by 800,000 barrels as per EIA, are well above their average range. In spite of rising U.S gasoline glut, EIA reported that the U.S gasoline production increased last week and averaged 10.1 million barrels a day. Because of a weak product demand, any increase in gasoline production will further increase gasoline stocks and this will put further downward pressure on oil prices (NYSEARCA:USO).

What API says?

Before EIA, the American Petroleum Institute (API) came up with its own oil data and reported a crude oil inventory drawdown of 800,000 barrels for the week ending July 22, 2016. Normally, oil prices increase when crude oil inventories go down. However, oil prices continued to fall mostly because of negative sentiments because of rising crude and refined product glut. However, API reported that strategic crude oil inventories at Cushing, Oklahoma increased by 1.4 million barrels a day and this was more than the market expectations. When we look at gasoline inventories, API threw a surprise at it reported a drawdown of 400,000 barrels which is in sharp contrast to the EIA data which showed an increase of 500,000 barrels. Apart from this, API said that distillate fuel inventories increased by 290,000 barrels which is again in contradiction with EIA's 800,000 barrel- decrease.

Takeaway

On one hand, there is EIA which says that U.S crude oil inventories and gasoline inventories have increased last week and fuel distillate inventories have decreased. On the other hand, there is API which is reporting exactly the opposite! This is not the first time when API and EIA came up with contrasting data. In spite of contradicting oil reports, the markets will continue to remain bearish on crude oil and gasoline, as any possibility of a rise in product demand remain slim. Although oil prices increased slightly (supported by a strong US dollar), it must be noted that WTI has fallen by almost 6 % in the last one week. I believe that EIA data is more accurate (this time) as rising gasoline glut is directly related to rising gasoline inventories. Looking at this situation, I believe that oil prices will remain low for a while and investors must take note of this.

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