How do oil prices rise when crude oil inventories fall?

[Bilbobaggings]

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]

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.

 

[manateerex]

Declining crude oil inventories means a decline in oil supply. As oil prices are driven by the supply-demand, if there is less oil in the market to meet the requirements, obviously the prices are gonna get affected.
I hope this will help you...

Crude Oil: Lower Production Is Starting To Have An Impact On Prices
Oil Price Forecast for 2016: Price to Stay Low or Rebound?

 

[Joeyherron]

How do oil spills effect the crude oil market?

 

[tomorton]

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]

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