Oil Stocks Edge Higher as API Data Shows Slight Increase

U.S. Crude Inventories Surge Unexpectedly, Defying Analyst Expectations

Washington D.C. – In a significant shift from analyst predictions, U.S. crude oil inventories experienced a substantial increase for the second consecutive week,with the American Petroleum Institute (API) reporting a staggering 19.10 million barrel build in the week ending July 11. This follows a robust 7.1 million barrel accumulation in the preceding week, marking the largest single-week inventory rise recorded by the API in at least a decade.

The reality diverged sharply from market expectations, as analysts had anticipated a draw of 2.0 million barrels. This unexpected surge brings the year-to-date increase in crude oil inventories to 30 million barrels, a trend that runs counter to the typical seasonal drawdown usually driven by heightened summer demand.

Adding to the complex picture, the Department of Energy (DoE) noted a rare decrease in crude oil inventories held within the Strategic Petroleum Reserve (SPR). The SPR saw a reduction of 300,000 barrels,bringing its total to 402.7 million barrels for the week ending July 11. Notably, current SPR levels remain considerably below those recorded before the withdrawals initiated under the Biden Administration.the market reacted to this data with downward pressure on oil prices. At 3:47 pm ET, Brent crude was trading down $0.43 (0.62%) at $68.78 per barrel, a nearly $2 per barrel decline from the previous Tuesday. West Texas Intermediate (WTI) also saw a decrease, trading down $0.34 (-0.51%) at $66.64 per barrel, also down approximately $2 per barrel compared to the prior week.

On the refined products front, gasoline inventories fell by 4.53 million barrels in the week ending July 11, building on the 2.2 million barrel decrease from the week prior.As of the latest EIA data,gasoline inventories stand 1% below the five-year average for this period. Distillate inventories also declined, dropping by 2.390 million barrels this week, following an 800,000 barrel decrease in the previous week.Distillate inventories were already critically low, sitting 23% below the five-year average as of the week ending July 4.In a separate progress, inventories at Cushing, Oklahoma, a crucial hub for U.S. futures contracts, decreased by 980,000 barrels. this follows a modest 100,000 barrel gain in the preceding week.

It is important to note a discrepancy in reported data. While the API initially indicated a substantial crude build, subsequent data released by Reuters presented a different scenario, suggesting a U.S. crude inventory build of only 800,000 barrels. Reuters data also indicated a 100,000 barrel increase in Cushing inventories, a 1.9 million barrel rise in gasoline stocks, adn an 800,000 barrel increase in distillates.

Why are oil stocks rising despite a smaller-than-expected increase in crude oil inventories according to the API report?

Decoding the Latest crude Oil Inventory Report

Yesterday’s American petroleum Institute (API) data revealed a modest increase in crude oil inventories, yet surprisingly, oil stocks are trending upwards. This seemingly counterintuitive reaction highlights the complex interplay of factors currently influencing the energy market. The API reported a build of approximately 2.4 million barrels for the week ending July 15, 2025, falling slightly short of analyst expectations which predicted a 2.7 million barrel increase. Despite this, investor sentiment remains cautiously optimistic, driving gains in several key energy stocks.

Key Players Seeing Gains

Several companies are benefiting from this positive, albeit subtle, market shift. Here’s a snapshot of performance as of mid-morning trading on july 16, 2025:

ExxonMobil (XOM): Up 0.8%, bolstered by continued strong refining margins.

Chevron (CVX): Showing a 0.6% increase, supported by its diversified portfolio.

ConocoPhillips (COP): Gaining 1.1%, driven by positive outlooks on shale production.

Schlumberger (SLB): Leading the pack with a 1.5% jump, reflecting renewed interest in oilfield services.

occidental Petroleum (OXY): Up 0.9%,benefiting from its Permian Basin assets.

These gains aren’t solely attributable to the API data. The escalating geopolitical tensions in the Middle East, specifically the recent israel-Iran conflict, are playing a meaningful role. As reported last night, strikes targeting Iranian nuclear facilities have heightened concerns about potential supply disruptions, pushing crude oil prices higher.

The Geopolitical Factor: Israel-Iran Conflict & Oil Supply

The recent escalation between Israel and Iran is injecting a considerable risk premium into the oil market. the possibility of wider regional conflict, and the potential impact on oil production and transportation routes – especially the Strait of hormuz – is fueling investor anxiety.

Here’s how the situation is unfolding:

1. Supply Disruption fears: Any disruption to Iranian oil exports, even temporarily, could substantially tighten global supply.
2. Increased demand for Alternatives: Concerns about supply are prompting some nations to seek alternative sources, possibly increasing demand for US crude oil.
3. Safe Haven Asset: In times of geopolitical uncertainty, oil often acts as a safe haven asset, attracting investment.

This dynamic is overriding the impact of the API inventory build, which typically signals a softening in demand. The market is currently prioritizing perceived risk over short-term supply/demand fundamentals.

API vs. EIA: what’s the Difference?

Understanding the nuances between the API and the Energy Data Governance (EIA) reports is crucial for investors. The API report is released before the EIA’s weekly petroleum status report, offering a preliminary glimpse into inventory levels. However, the EIA report is considered the official source and often differs from the API data due to different methodologies and data collection techniques.

API (American Petroleum Institute): Industry association data, frequently enough viewed as a leading indicator.

EIA (Energy Information Administration): Government data,considered the official benchmark.

Investors typically await the EIA report (scheduled for release tomorrow) for confirmation of the API findings. A significant divergence between the two reports could trigger further market volatility.

Analyzing Refining Activity & Gasoline Demand

Beyond crude oil inventories, the API report also provided insights into refining activity and gasoline demand. Refinery utilization rates remained relatively stable, indicating consistent processing of crude oil into refined products. Gasoline inventories saw a slight decrease, suggesting continued strong summer driving demand. This is a key indicator as we move further into peak driving season.

investing in Energy Stocks: A cautious Approach

While the current environment presents opportunities for energy stock investors, a cautious approach is warranted. The geopolitical situation remains highly fluid, and the potential for escalation is real.

Here are some practical tips:

Diversification: Don’t put all your eggs in one basket. Diversify your portfolio across different energy sub-sectors (upstream, midstream, downstream).

Long-Term Perspective: focus on companies with strong fundamentals and a long-term growth strategy.

Stay Informed: Continuously monitor geopolitical developments and economic indicators.

* Consider ETFs: Energy sector ETFs (Exchange Traded Funds) offer a convenient way to gain exposure to a broad range of energy companies.

Historical Context: Oil Price Shocks & Market Reactions

Looking back at previous geopolitical events, we can see patterns in how the oil market reacts. The 1973 oil crisis, triggered by the Arab oil embargo, led to a quadrupling of oil prices and a global recession. More recently, the 2020 oil price crash, caused by the COVID-19 pandemic and a price war between Saudi Arabia and Russia, demonstrated the vulnerability of the market to unforeseen shocks. These historical examples underscore the importance of understanding the complex interplay of geopolitical, economic, and supply/demand factors.