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EIA Stuns Oil Market With Huge Inventory Build

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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  • Brian Bresee on March 14 2018 said:
    This is a sweet moment in time for the United States as they produce as much oil as they want, while they watch other nations like Saudi Arabia and Russia make room for their unbridled production by drilling less. With US antitrust law, only the price of oil will change this equation. Market forces will eventually set the real price of oil again, which is around $45 to $50 per barrel, the price where US oil companies can drill and still make money.

    The only question now is if Saudi Arabia can keep the price of oil up long enough to produce a successful IPO.
  • Mamdouh G Salameh on March 14 2018 said:
    The EIA has lost a lot of credibility with the exaggerated figures it regularly announces about increases in US oil production and exports and also rises in US oil and gasoline inventories. These figures need to be checked by an independent audit to be authenticated otherwise they remain fake news.

    Many organizations and experts around the world prominent among them MIT have accused the EIA of overstating US oil output and the potential of US shale oil industry.

    Circumstantial evidence suggests the EIA has been manipulating the shale oil production figures and US oil stocks data in order to depress oil prices.

    A build of US oil inventories could only happen in one of three ways: one if the United States is producing far beyond its oil needs. This is not the case otherwise it will not be importing almost 8 mbd. The other is that the US is taking advantage of low oil prices by importing so much thus increasing its stocks. If this is the case, then the rising demand for imports should push the price up. A third is that US oil demand is declining thus adding to the stocks. This is not true as US oil demand has been steadily growing by 1.54% annually for the five four years.

    That is why one has to take the EIA figures with a huge pinch of salt.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • John Brown on March 14 2018 said:
    So we continue with a glut of oil out there, no shortages in sight, OPEC/Russia idling or needing to idle more capacity, and the U.S. oil industry roaring ahead, as it will should with oil over $60 a barrel for WTI. OPEC and Russia really should idle a little more capacity to keep prices up. WTI at $65 is perfect, but they are going to show they are committed to reducing the glut on the market by lowering production some more to get there.

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