Please ensure Javascript is enabled for purposes of website accessibility

Surprise Drop in U.S. Crude Inventories Fails to Rally Oil Market

By John Bromels – May 14, 2020 at 7:48AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Signs of increased demand didn't lift oil prices.

U.S. commercial crude oil stockpiles fell last week for the first time since January, according to data released Wednesday morning by the U.S. Energy Information Administration (EIA). The 700,000-barrel drop surprised analysts, who had been expecting a 4.1 million-barrel increase, according to a Reuters poll.

However, the news didn't have much of an impact on benchmark WTI Crude prices, which spiked briefly on the news to above $26 a barrel, but retreated throughout the rest of the morning as concerns about potential spikes in coronavirus infections worried investors. 

Stocks of independent U.S. oil exploration and production companies (E&Ps) like ConocoPhillips (COP -8.60%)EOG Resources (EOG -7.80%), and Marathon Oil (MRO -10.94%) didn't see a benefit, either: All opened lower and sank further throughout the morning. 

A large group of oil barrels.

Image source: Getty Images.

Demand is up

Total gasoline inventories fell last week, too, by 3.5 million barrels. When combined with a 6.2% increase in four-week average gasoline production over the prior week's figure, demand for motor gasoline seems to be on the rise. 

Despite this apparent uptick in gasoline demand, oil oversupply remains a concern. Crude oil storage near the WTI hub of Cushing, Oklahoma, is still at more than 80% of capacity. Despite a 321,000-barrel decrease from the prior week, crude oil imports are still gushing into the country at a rate of 5.4 million barrels/day. 

It's also worth noting that the U.S. Strategic Petroleum Reserve slurped up 1.9 million barrels of crude supply during the week, meaning overall U.S. crude stockpiles (including the SPR) increased by 1.2 million barrels overall. 

Oil industry investors may also be concerned that last week's figures represent a one-time blip rather than the beginning of a sustained decrease in oil stockpiles.

John Bromels has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

ConocoPhillips Stock Quote
ConocoPhillips
COP
$100.59 (-8.60%) $-9.47
EOG Resources, Inc. Stock Quote
EOG Resources, Inc.
EOG
$109.12 (-7.80%) $-9.23
Marathon Oil Corporation Stock Quote
Marathon Oil Corporation
MRO
$21.90 (-10.94%) $-2.69

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.