How do oil prices rise when crude oil inventories fall?

Bilbobaggings

Newbie
1 0
Hi, I am new here, I am reading a post on CNBC which states

Weekly crude oil inventories unexpectedly fell, supporting further gains in oil prices.

1) Why does crude oil inventories unexpetedly falling make oil prices rise?

2) By Crude oil inventories falling do they mean stock running out due to mass purchase?

3) What could cause oil inventories to unexpectedly fall?

I am assuming a purchase from somebody lowering stock overall could cause panic buying from others therefore temp demand making prices rise? - Probably wrong.
 

options-george

Well-known member
483 92
If inventories fall, it implies that there is less to go round - effectively supply has decreased. If supply decreases, then the equilibrium price should rise (this is a basic rule of supply & demand in economics).

If inventories are higher than expected, then oil generally falls.

Inventories refers to the amount of oil in tanks around the US (I think it's just the US) - and it's basically an indicator of consumption versus production - the amount of new oil flowing into the tanks from the drilling versus the amount flowing out of the tanks to be used by people driving their cars and companies using it in their manufacturing processes (this might be oversimplyfing things).

Unexpected increases in consumption or unexpetced decreases in production will cause inventories to fall.

Generally speaking, the Weekly Oil Inventories on Wed afternoons is the most important announcement for oil prices.

Hopefully that helps.
 

tomorton

Legendary member
7,288 974
On a wider note, its wise to be very cautious about accepting what some journalist says is the reason for a fall or rise in any market. What do they know about it?
 

cips

Newbie
4 0
Hi, I am new here, I am reading a post on CNBC which states

Weekly crude oil inventories unexpectedly fell, supporting further gains in oil prices.

1) Why does crude oil inventories unexpetedly falling make oil prices rise?

2) By Crude oil inventories falling do they mean stock running out due to mass purchase?

3) What could cause oil inventories to unexpectedly fall?

I am assuming a purchase from somebody lowering stock overall could cause panic buying from others therefore temp demand making prices rise? - Probably wrong.
good question Bilbobaggings
 

Similar threads


AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock