I am new to economics, 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.


1 Answer 1


1) Supply and Demand. When supply falls, what supply remains becomes more valuable

2) There are massive storage tanks across the US (Cushing, Oklahoma comes to mind) where oil companies can purchase/rent storage space. Refineries cannot process crude as fast as it is extracted, so the backlog must be stored somewhere.

3) Any number of reasons. Increased consumption from industry or consumers. "unexpectedly fell" could actually mean that inventories grew slower than expected because drillers have reduced output. Perhaps a refinery came online after being shut down and helped draw down the crude stockpile.


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