Will the Crude Oil Market Crash Prove Goldman Sachs Right?
On July 7, 2015, the API (American Petroleum Institute) will publish the weekly oil, gasoline, and distillates inventory estimates. Last week, the API data estimated that US commercial crude oil inventories rose by 1.9 MMbbls (million barrels) for the week ending June 26, 2015. The inventory report also reported that gasoline and distillate inventories rose by 334,000 barrels and 263,000 barrels, respectively, for the same period.
The API data is a precursor to the EIA (U.S. Energy Information Administration) inventory data. It’s scheduled to release on July 8, 2015. Last week, the EIA data showed that the oil stockpile rose by 2.4 MMbbls (million barrels) to 465.4 MMbbls for the week ending June 26, 2015. Crude oil inventories rose for the second time in the last ten weeks. Currently, crude oil stocks are almost 21% higher than the levels last year.
Data compiled by Bloomberg show that crude oil inventories fell by 750,000 barrels for the week ending July 3, 2015. Market surveys suggest that gasoline stocks are expected to fall by 147,000 barrels for the same period. In contrast, distillates stocks are expected to rise by 0.754 MMbbls. The falling inventories might support crude oil prices. In the current situation, the oil market is overshadowed by long-term fundamentals.
Yesterday’s crude oil carnage might impact the profit margins of oil and gas producers like Newfield (NFX), Hess (HES), and Noble Energy (NBL). Combined, they account for 6.44% of the Energy Select Sector SPDR ETF (XLE). These companies also have a crude oil production mix that’s greater than 59% of their total production. The uncertainty in the crude oil market also impacts the performance of ETFs like XLE and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
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