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Beautiful Oil Data

Summary

Over the past week, a slew of great oil data has come out, with inventories falling across many key categories.

While the picture isn't perfect, the situation looks pretty nice when you add to this the fact that production is also falling at a very nice clip.

On top of this, demand is still very strong and the rig count is still heading down at a nice pace, implying meaningful upside in the long run.

Oil prices have been mostly positive after news broke that inventories for the prior week came in much better than many had anticipated. For obvious reasons, this is a net positive for oil investors but what wasn't focused on all that much in the media was the fact that other indicators were also really good during the week, which should be bullish for investors in the United States Oil ETF (NYSEARCA:USO), other oil-related ETFs, and for investors in oil-related companies like Memorial Production Partners (NASDAQ:MEMP), Approach Resources (NASDAQ:AREX), and Legacy Reserves (NASDAQ:LGCY), keeping all else the same. In what follows, I will dig into this data, courtesy of the EIA (Energy Information Administration) and give my own interpretation of what the market's looking like moving forward.

Large (but mostly positive) inventory swings

According to the EIA, oil inventories for the week came in at 540 million barrels. While this is near record levels and implies that we need to see this number decline quite a bit before we are back to an acceptable inventory range, it does represent a decline of 3.4 million barrels from the 543.4 million seen a week earlier. This implies a major win over the 3.45 million barrel build previously estimated by the API (American Petroleum Institute). In the graph below, you can see the historical trend that oil inventories have taken over the past 52 weeks.

Fortunately, oil inventories weren't the only thing to fall week-over-week. If the EIA's estimates are accurate, motor gasoline stocks fell by 1.2 million barrels from 241.8 million to 240.6 million...


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