Executive Summary
In the last five weeks, from May 1st to 30th, inventory levels increased twice and decreased thrice weekly. However, those decreases were insufficient to offset the current 1.064M inventory surplus. Such an inventory surplus reflects the slow crude oil price decline since peaking on April 1st. Crude oil demand looks weak, decreasing producers' profitability and stabilizing consumer prices. In conclusion, stay invested in the S&P 500 and avoid energy and utilities stocks.
Why You Should Care About This Leading Economic Indicator!
Crude oil inventory level is a significant leading economic indicator of the health of the US economy. The oil inventory level is a good barometer of economic health because most consumed services and products are oil-derived ― gasoline, diesel fuel, residual fuel (tankers), jet fuel, and plastics (petrochemicals). By the end of this investment report, you should understand the impact of crude oil inventory levels on your investment portfolio.
Chart Analysis
Key Points
Crude oil inventories were down -327.7 %, -157.2 %, and 66.6%, respectively, week over week, month over month, and year over year. It came in at -4.156M, beating the -1.600M consensus estimates.
In the past 30 days, crude oil inventories averaged 0.213M barrels daily.
After adding up all the weekly crude oil inventories from the past twelve months, there was a -.473M oil shortage; however, in the past 6 and 3 months, inventory surpluses stood at 5.025M and 7.526M, respectively. There was also an outstanding surplus of 1.064M in the past 30 days.
Investment Analysis
The -4.156M in oil inventories in the last week of May implies that the US economy showed good industrial production, with factories and utilities using energy, people driving to work, flying, and boating in the last week of May, and overall consumption was slower. If supply continues to exceed demand, we see lower oil prices in the next three months, impacting oil producers' profitability to the downside; this could improve consumer spending on transportation, heating, and other goods. We recommend staying in the S&P 500 while avoiding energy and utilities stocks.
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