After plunging oil bulls into deeper gloom by forecasting a 131,000-bpd jump in shale oil production next month, the Energy Information Administration reported a 5-million-barrel increase in crude oil inventories for the week to March 9—in stark contrast to yesterday’s API figures.
This compares with a 2.4-million-barrel build reported last week and analyst expectations of a 560,000-bpd increase. A day earlier, the American Petroleum Institute reported an estimated 1.156-million-barrel inventory increase for the period.
In gasoline, the authority gave market players some respite, saying that inventories had fallen by whopping 6.3 million barrels, after an 800,000-barrel decline a week earlier. Gasoline inventories have been rising for most of the time since the start of the year, with just two weekly declines so far, to the tune of 2.8 million barrels. This is the third gasoline inventory decline since January.
Refineries processed 16.4 million barrels of crude daily last week, up from 15.9 million bpd a week earlier. Gasoline production averaged 10.3 million barrels daily, compared with 9.9 million bpd in the week to March 2.
Prices have been moving lower pretty consistently in the last couple of weeks as worry deepens that growing U.S. shale oil production is undermining OPEC and Russia’s cuts. There are even suspicions the cartel might choose to end the deal earlier than December 2018 as internal disagreements pit Iran against Saudi Arabia yet again. Iran feels fine with benchmarks around US$60, while the Kingdom needs higher prices to make the Aramco IPO a success.
The EIA is not helping: in its latest Drilling productivity Report, the authority forecast that shale oil production will hit 6.954 million barrels daily next month, pulling the U.S. total also higher. This was bound to aggravate concern about the OPEC deal and intensify internal tensions in the cartel.
At the time of writing, Brent crude was trading at US$64.71 a barrel and West Texas Intermediate was at US$60.87 a barrel, with some analysts cautioning U.S. crude could slip below US$60 if the rate of production growth continues and no new tailwind presents itself.
By Irina Slav for Oilprice.com
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