Crude Oil Inventories and Its Relation to Market Price

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A weekly Petroleum Status Report which is issued by the U.S. Energy Information Administration (EIA), is one of the most important information for the energy traders. They will closely analyze and respond to this report, the moment this report comes up. The report is released in a headline every Wednesday, at 10.30 a.m. Eastern time and it contains information on oil product inventories in the U.S., including those produced inside and outside the country by major oil companies. The popular concept is that the changes in crude oil inventories help create a short-term crude oil prices.

As we all know, that just like other good or service, crude oil prices are determined by provide and market orders. The level of crude oil inventories will influence the price of oil products which, at the end, can affect inflation.

It’s widely known that during episode of strong economic condition, people would expect demand to be forceful. In this condition, if the crude oil inventories rises, price may not be influenced but if the inventories decline, the crude oil prices will rise.

Another condition will be different in the period of slow economic growth. If the oil inventories are increasing more than the expected, this may cause crude oil prices fall (bearish) because of the declining in oil demand. When the increasing in oil inventories is less than the expectation, it will lead to a greater demand. Thus, it should be taken as a positive trend or bullish for crude oil prices and it’s influencing the USD since the positive trend of crude oil prices means the USD gets stronger in the market. This occurs vice versa if the crude oil prices decrease which means the USD is also declining.

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