Oil Storage Down Three factors are driving the renewed optimism in the industry. First, oil demand has been stronger than expected this year. Second, shale drillers tapped the brakes when prices dipped into the $40s, which will lead to slower production growth in the near-term. Finally, those factors, when combined with OPEC's production cuts, are making a meaningful dent in oil storage levels.
Just this week the U.S. Energy Information Administration (EIA) reported that crude stockpiles in the country fell by another 5.7 million barrels, which was 1.5 million barrels more than analysts expected. While inventories remain near the upper limit of the range for this time of year, that's an improvement considering that they had been well above that level for quite some time. Bob Dudley, the CEO of oil giant BP (NYSE: BP) put it best when he said at a recent industry conference that "the swimming pools are draining." The BP CEO further noted that "stock levels are just heading down, for both crude and [refined] products. So it does seem we're heading toward the targets that were set by OPEC." Because of that, he thought crude looked like it would at least stabilize around the current price.