Analysis - Crude Oil Stock Change For March 4

Analysis - Crude Oil Stock Change For March 4

By Yash

The crude oil stock change was that the stockpiles of oil in the country experienced a decline across the board in the week ended March 4. The inventories of crude oil declined by nearly two million barrels in the previous week to reach a mark of 411 million barrels. Experts had predicted that that decline would be much lower at six hundred thousand barrels. The stocks of crude oil in the Strategic Petroleum Reserve declined to more than five hundred and fifty million barrels. This is the lowest mark in the past twelve years. The data was released by the Energy Information Administration. There are worries in the global energy markets that the crude oil stock change may decline after narrowing supply chains because of the ongoing war between Russia and Ukraine that started a few weeks ago.


The Energy Information Administration said that the crude oil stock change declined across the board in the previous week. The stocks of crude oil at the delivery hub at Oklahoma declined by nearly six hundred thousand barrels in the week to the lowest mark in the past four years. In the previous week, President Joe Biden said that the country would release more than twenty-five million barrels of oil from the Strategic Petroleum Reserve because of oil shortages caused by the war between Russia and Ukraine. White House spokesperson Jen Psaki said, "We are prepared to use every tool available to us to limit the disruption to global energy supply as a result of (Russian) President (Vladimir) Putin's actions. We will also continue our efforts to accelerate the diversification of energy supplies away from Russia and secure the world from Moscow's weaponization of oil and gas."


Matt Smith from Kpler said, "Gas and distillate inventories dropped as implied demand rose for both, while distillate exports rose strongly - helped by a rise bound for Europe, which could be to replace the impending loss of Russian supplies amid self-sanctioning." US Energy Secretary Jennifer Granholm said, "We stand prepared to take additional measures if conditions warrant." 


Crude Oil Stock Change: The US To Release Barrels Of Oil


The United States pledged to release more than twenty-five barrels of oil. This initiative is part of the effort to release more than fifty million barrels to keep the global energy prices in check. The cost of oil is in peril of major inflation because of the ongoing war between Russia and Ukraine. The country also said that it could take further steps when required. The United States and more than twenty member nations of the International Energy Agency have pledged to release millions of barrels of oil from their strategic reserves. They will take these steps to keep oil prices in the global energy markets in check. This was stated by the US Department of Energy in a statement.


Co-founder of DataTrek Research Nicolas Colas said, "The rule of thumb I learned from auto industry economics in the 1990s is that if oil prices go up 100% in one year, expect a recession. We are close and getting there fast. A day or two is OK, but a few weeks is not. Recessions don't come along that often, so we're talking about three periods since 1990. The issue here is that oil prices may have risen quickly. Still, they were nowhere near unusually high levels relative to the recent past. Consumers, in other words, had already mentally budgeted for those levels, and while they were certainly unwelcomed, they were not a complete surprise. In 1987 we got a large spike on a percentage basis, but not on an absolute basis versus the prior few years.”


“From 2011 – 2014, the percent change of the 2009 – 2010 bottom hit 80 percent, but on an absolute basis, WTI was in line with the immediate pre-crisis past. I don't know the right number, but I know even in 2019, it was 5% of the index. What else do you need? European equities are just getting demolished. We don't share a landmass with Russia. If you want to win, it's energy. The biggest rookie mistake an analyst can make is trying to short a new high. Never short a new high. $130 is the max for oil. We don't often see more than 100% return. But oil stocks are such cheap and good dividend payers."


How Drastic Crude Oil Stock Change Can Trigger A Recession


The national average for a single gallon of gas went to its highest price in the past fourteen years. The financial markets were on edge with the ongoing war that is the first land conflict in the continent of Europe since the second world war. This conflict is being waged by a country that is one of the biggest crude oil producers on the planet. Energy stocks and crude oil prices are major focus areas for many investors. It is not easy for participants of the financial markets to avoid whether energy stocks should still be bought, given the risks that are fraught in the geopolitical arena. It is also undecided whether the crude oil stock change can cause a recession in the future. A few days ago, experts said that the WTI crude oil had increased by more than fifteen percent in a week.


This is one of the four periods where crude oil rallied more than fifteen percent in a single week. It also said that two of the prior three periods where the prices increased happened during the recession. Rystad Energy is one of the top consulting and research organizations in the energy sector. It predicts that there is going to be a decline in the oil exports from Russia that can be more than 900,000 barrels per day. The middle east has limited spare capacity to take the place of these supplies. It will cause a great impact on the oil prices that are going to continue to increase. This can also go beyond one hundred and twenty dollars per barrel. 


Experts believe that this is a great time to search the value of energy stocks in a diversified portfolio and think about the risk of the prices in oil that is causing a recession. Some experts say that the presentation decks for oil stocks have not changed in the past half a century. But they believe that the financial markets still need not be that concerned. The oil prices would have to keep doubling to be a major concern, rather than just hiking a little and then going back to their usual place. Other analysts of the financial markets say that the present times are not the same as they were nearly fifty years ago. Now, oil is a much smaller part of the economy and the overall consumption than it was back then. An analysis by JPMorgan last year said that the financial markets would remain steady in the scenario where the oil prices go up to more than one hundred and twenty dollars.



The energy sector won’t go back to that same level of importance in the financial markets on a sector basis. But as recently as five years ago, when the pundits in the market talked about oil firms being seen as underperforming, the overall sector was still over five percent of the market. When the sector fell to less than three percent of the index, buying the oil stocks was a good move. But experts say that four percent is not the level at which investors should sell their stocks. All the investors should be focusing on hedging the risk in the financial markets at present, and maybe only in the United States with the energy shares. The energy shares were hit quite hard in the European continent in the previous week. This shows that the energy prices in the country are not about oil alone.