Amid growing pessimism regarding an extension of OPEC’s oil production deal, and a day after the American Petroleum Institute reported an estimated increase of 897,000 barrels in U.S. commercial inventories, the EIA reversed the mood with a draw of 3.6 million barrels for the week to April 21.
Analysts had expected a respite for oil prices with a decline in inventories of 1.6 million barrels and though they were out of luck with API, EIA exceeded the expectations.
The EIA reported that crude inventories stood at 528.7 million barrels at the end of last week, still near the upper seasonal limit despite refineries increasing their runs after the end of maintenance season, which some analysts argued was the reason for the hefty weekly inventory increases that we saw over the last couple of months.
They may well have been right, as refinery runs averaged 17.3 million barrels in the week to April 21, up 347,000 bpd on the previous week, with refineries operating at 94.1 percent of capacity. Gasoline production averaged 9.7 million barrels, compared with 9.8 million barrels in the previous week.
Gasoline inventories increased by 3.4 million barrels and are still near the upper limit for this time of year, and distillates increased 2.7 million barrels.
Oil prices have been hovering around four-week lows in the past week, pressured by the global inventory situation and wilting hopes that an OPEC extension would this time do the trick and take care of the excess supply.
Still, yesterday Brent and WTI picked up a little on analyst expectations that the API would report a draw in U.S. inventories, but that came after six straight sessions in the red for the benchmarks. Now, EIA’s figures are bound to provide a boost for benchmarks.
Even so, analysts seem to share the opinion that the first OPEC deal was a failure, despite the high compliance rate. The cartel and its external partners will have to cut deeper and for longer if they are to influence oil prices in any meaningful way.
Amid all this, Russian government officials have been reported to suggest that the country’s oil production could hit the highest in 30 years in 2017, if OPEC does not agree to extend the cuts, adding to headwinds for oil prices.
By Irina Slav for Oilprice.com
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