As crude oil begins to slide back down on talk about a possible easing of the OPEC+ production cuts, the Energy Information Administration added to bearish sentiment by reporting a hefty build in crude oil inventories of 5.8 million barrels for the week ending May 18.
The EIA report comes a day after the API’s estimate that inventories had fallen by 1.3 million barrels last week, which might have been positive for prices if the lobby group had not also reported a gasoline inventory build of 4.85 million barrels.
The EIA estimated gasoline inventories had gone up by 1.9 million barrels, with average daily production at over 10 million barrels. In distillates, the authority reported a 1-million-barrel draw in inventories for last week, with production at 4.9 million barrels daily.
Last week, the EIA reported draws in both crude oil and gasoline inventories, but oil production in the United States continued to grow, hitting 10.72 million bpd. This week the production figure will most likely also be higher, reining in any positive price moves prompted by geopolitical factors, notably any further U.S. response to Nicolas Maduro’s victory at the Sunday presidential elections in Venezuela. Related: Can Angola Overcome Its Oil Production Decline?
Meanwhile, oil prices began sliding down from four-year highs that were hit last week on indications that OPEC is considering an easing of its self-imposed production limits in response to the shrinking global overhang as well as a severe decline in Venezuela oil production and the possibility of a drop in Iranian oil exports resulting from the return of U.S. sanctions against the country.
At the time of writing, Brent crude was trading at US$79.12 a barrel, with West Texas Intermediate at US$71.97 a barrel. Most analysts seem to agree that geopolitical tensions in the Middle East and the situation in Venezuela will continue to support prices at least until OPEC’s next meeting with Russia, due in a month, when an announcement of quota easing might pressure them further, especially if U.S. production continues to grow at the current steady rate. On the other hand, the market has four weeks to come to grips with the idea of easing, so the negative effect might be limited and short-lived.
By Irina Slav for Oilprice.com
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