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Oil prices inched up on Tuesday in a low volume trading session after the American Petroleum Institute’s (API) weekly report showed a larger than expected draw of 4.15 million barrels to the United States’ commercial crude inventories, instead of an expected 2.5 million-barrel draw.
The build comes after last week’s report from the Energy Information Administration (EIA) that showed a drop of 2.6 million barrels of crude oil in inventories the week prior.
Gasoline inventories have seen builds over the past six weeks as the winter season has now started and demand for road fuels is in decline. API however has Gasoline inventories falling this week by 1.96 million barrels.
Crude levels at the Cushing, Oklahoma once again increased, and while analysts expected a somewhat significant 1.9 million barrels to be added, according to API, only 690,000 barrels were added. Crude storage levels at this key site have been rising rapidly since October, and this week’s report confirms the 4th weekly build according to Zerohedge.
Lastly, API data sees a bullish 1.55 million barrel draw to distillate inventories.
Figure 1: EIA data shows a spike in Cushing inventories
Today’s API projections are expected to be confirmed by tomorrow’s EIA data. Markets got slightly more optimistic about OPEC’s compliance to the output cut deal over the course of the week, and this has caused oil prices to rise in the last three trading sessions.
Related: Traders Most Bullish On Oil Since 2014
The outlook however for U.S. crude inventories could prove to be slightly bearish in the near term. According to Research Director Matt Smith at Clipperdata, just under 25 million barrels of crude oil are sitting offshore in the Gulf of Mexico after stormy weather conditions slowed imports two weeks ago.
According to Smith, ad valorem tax strategizing could be another reason for the growing number of barrels stored in the Gulf of Mexico.
The price of WTI was up 0.19% to $52.22 at 4:15 PM CST, while Brent traded 1.11% higher at $55.53. Gasoline prices were up 2.20% to $1.6179.
By Tom Kool of Oilprice.com
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Tom majored in International Business at Amsterdam’s Higher School of Economics, he is now working as news editor for Oilprice.com.