Comparative Inventory Tells Recent Oil Price Story

Oil Comparative Inventory

Analysts propose all kinds of explanations for why oil prices have fallen since late September. They are all somewhat true but the real reason is that comparative inventory (C.I.) has increased.

Crude plus refined products C.I. rose almost 2.5 million barrels (mmb) for the week ending January 5 (Figure 1). C.I. has increased +34 mmb since September 1 and WTI price has fallen -$18.75 since September 29.

C.I. goes up and WTI goes down. That’s a pattern that you can take to the bank. Until C.I. starts to decrease, oil price is going to wander aimlessly a few dollars above or below its marginal price.

Figure 1. Comparative inventory (C.I.) rose +2.41 mmb & WTI fell -$1.03 week ending January 5. C.I. has increased +34 mmb since September 1 and WTI price has fallen -18.75 since September 29. Source:  EIA & Labyrinth Consulting Services, Inc.  

Estimating marginal price is another useful aspect of C.I. Figure 2 shows the long-term trend line that correlates C.I. and WTI price. That trend line or yield curve suggests that the WTI average spot price of $72.49 last week was about $1.50 more than the marginal price of $71.

Figure 1. WTI average spot price of $72.49 is slightly higher than its marginal price of about $71 based on multi-year price-comparative inventory levels. Source:  EIA  & Labyrinth Consulting Services, Inc.      

Excursions from the yield curve are common. They ordinarily occur when markets are testing the possibility of a structural change in supply urgency.

For example, C.I. for the first quarter of 2023 (Figure 2) was similar to the value for last week but price was about $5 higher. That was probably because in Q1 markets were testing the meme that the end of China Covid lockdowns would boost oil demand.

When that didn’t happen as expected, the second quarter average price dropped below the yield curve. In the third quarter, C.I. had fallen considerably since Q1, and markets were testing the meme of an impeding supply deficit. That didn’t happen either so now, price-C.I. data points are following the yield curve.

This morning (January 11), WTI price is more than $2.00 higher than it was yesterday because Iran seized an oil tanker in the Persian Gulf. Frankly, I am surprised that markets have discounted the geopolitical risk as much as they have since the Hamas-Israel conflict began in last year. I wrote a post in mid-October suggesting that prices could easily reach $100 to $120 if the conflict widened.

Markets have become progressively quicker to discount oil supply risk over the last five years or so. When the core of the Saudi refining complex was attacked in September 2019, WTI increased about $7 but the average price for the last week of September was lower than for the first week.

Traders make a living on the short-term movements of price. Most investors, however, are more interested in making a profit on price changes over a somewhat longer period of weeks to months. For them, I recommend adding comparative inventory to the tools they use.

Art Berman is anything but your run-of-the-mill energy consultant. With a résumé boasting over 40 years as a petroleum geologist, he’s here to annihilate your preconceived notions and rearm you with unfiltered, data-backed takes on energy and its colossal role in the world's economic pulse. Learn more about Art here.

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  1. Dave Messler-"Fluidsdoc" on Seeking Alpha on January 12, 2024 at 11:57 am

    Agree on inventory builds notion. Don’t you think the rise in shale production in the face of a declining rig count plays a role here as well?

    Glad to see you are publishing and hope you continue. Thanks for the information. Cheers!

    • Art Berman on January 12, 2024 at 2:06 pm


      Thanks for your comments.

      I think that rig count is increasingly irrelevant.

      All the best,


  2. EnergyAndEntropy on January 11, 2024 at 6:32 pm

    Price of oil cannot be increased by more than the price of few McDonald’s meals.

    If increased, the price of the meals will increase, too – and we are back to square one again – Price of oil cannot be increased by more than the price of few McDonald’s meals.

    This is exactly why fossil fuels were traded since James Watt under the doctrine and camouflage of what’s called – ‘supply and demand’ – not on the basis the fuels are finite.

    If coal was sold on the basis of being finite – Britain would have not fought the 19th Century wars in India, Sudan and others – for Newcastle to sell more steel – making railway tracks, locomotives and carriages.

    The coal went in vain, in the process, was much more valuable than the entire British Empire.

    Today, no railways in Sudan remain in operation, no British coal left in the ground – and no British Empire.

    The US needs to take a lesson and withdraws its navy from high seas – US little remaining coal is much more valuable than an assumed – American Empire.

    The time has come for the US to stop powering conflicts in the Middle East – for the little remaining oil in ME, Russia and Africa.

    America should sleep on its priceless coal, from now on – leaving the world sorting out its problems alone – without American weaponry – tooth and nail.

    In any system of energy, Control is what consumes energy the most” (2017).

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