Amid increasingly stronger signals from OPEC that the production cut extension will be extended into the second half of 2017 and even beyond that, the EIA reported a draw in crude oil inventories of 5.2 million barrels for the week to May 5.
A day earlier, the American Petroleum Institute had reported the largest draw in inventories since January, at 5.789 million barrels, failing, however, to instill much optimism in a consistently pessimistic market. The EIA’s confirmation of the size of the draw should have a bigger impact on prices.
The EIA’s gasoline inventory figures were also much more optimistic than the API’s: they fell by 200,000 barrels, while the API reported these at 3.17 million barrels more than the previous week.
In the previous week, the authority calculated gasoline inventories had risen by 200,000 bpd, with a build of 3.4 million bpd in the previous week, and 1.5 million bpd in the week to April 14. This makes last week the first in a month to see a decline in the stockpiles of the most popular fuel ahead of the start of driving season.
Refinery runs, according to the EIA, averaged 16.8 million barrels per day in the week to May 5, down from 17.2 million bps in the previous week. Gasoline production averaged 10.1 million bpd, from 9.8 million bpd in the week before. Related: Production Cuts vs Innovation – Why OPEC Has Lost The Oil Price War
The general feeling that the world is still awash in crude thanks to U.S. shale producers seems persistent enough not to be bucked by anything reported by the EIA, although a major draw in both crude oil and gasoline inventories might do the trick for a while.
Some industry observers are of the opinion that a simple extension of the OPEC cuts will sufficiently prop up oil prices. They argue that OPEC and its partners in the deal should cut deeper. However, it is doubtful how ready these producers would be to risk losing further market share.
Yet, ready or not, shale producers are raising their drilling budgets this year, in yet another clear signal that output growth will continue and even intensify. The results of these higher budgets will become evident in 2018, which is why the EIA is forecasting average daily production of almost 10 million bpd in 2018.
By Irina Slav for Oilprice.com
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