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A day after the American Petroleum Institute brought back some optimism to markets by reporting a much-awaited-but-slim draw to U.S. crude oil inventories, the EIA reversed the mood by reporting an even slimmer decline in inventories for last week of 200,000 barrels.
The API figure, although paling against a cumulative build of 34.6 million barrels for the last 11 weeks, helped prop up oil prices yesterday, after they suffered a blow from reports about an increase in Saudi Arabia’s February crude oil output.
The EIA’s report is likely to dampen the hopeful sentiment on an already excessively volatile market.
The authority reported that total inventories stood at 528.2 million barrels at the end of last week, still above the upper end of the seasonal average.
In gasoline inventories, things looked better: these were down by 3.1 million barrels last week, almost half the hefty 6.6-million-barrel draw in the week to March 2, but still substantial. Gasoline production last week averaged 9.5 million barrels daily, down from 9.8 million barrels in the previous week.
Refineries processed an average of 15.5 million barrels of crude, unchanged from the previous week.
Last week, the EIA estimated that U.S. crude oil production will reach 9.7 million barrels daily by 2018, which would represent a new historic high and a major drag on international prices.
Related: Why Last Week’s Oil Price Crash Was Inevitable
Saudi Arabia’s statement that its output had grown in February on a monthly basis, to 10.01 million bpd, sent both major benchmarks off a cliff, with WTI dipping to $47.71 a barrel in intraday trading, and Brent coming close to breaking the psychologically significant $50 price level.
The Kingdom insisted that this higher output figure does not mean it is going back on its pledge to help rebalance the oil market and that it’s still committed to this task. Indeed, OPEC’s secondary sources, which calculate the cartel’s output every month, noted that February output had fallen by 139,000 bpd, to a total of 31.96 million bpd, which is below the target figure of 32.5 million barrels. Yet it seems that this has not been enough to reassure traders that the glut is easing.
At the time of writing, WTI traded at $48.62 a barrel and Brent had inched up above $50, changing hands at $51.81 a barrel.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.