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Growing Crude Inventories Put A Cap On Oil Prices

Crude oil prices fell today after the Energy Information Administration reported an oil inventory build of 4.3 million barrels for the week to November 6.

The authority also reported a 2.3-million-barrel fall in gasoline stocks and a 5.4-million-barrel decline in distillate fuel inventories for the period.

The figures compared with a crude oil stock draw of 8 million barrels for the previous week, which pushed prices higher for a day, along with a 1.5-million-bpd build in gasoline inventories and a decline of 1.6 million barrels in distillate fuel inventories.

Gasoline production last week rose from the previous week, averaging 9.3 million bpd. Distillate fuel production averaged 4.2 million bpd, down on the week.

Refineries processed 13.4 million bpd of crude oil last week, a decline on the previous week, as we move closer to the winter season and even more subdued demand for fuels.

The EIA report could shake the price rally we have witnessed since the start of the week. The rally was caused by an announcement from Pfizer that its vaccine candidate for Covid-19 was showing promising efficacy results, combined with the latest election news from the U.S., even though a Biden presidency will not be that good for the oil industry.

On top of that, OPEC+ suggested it could deepen the oil production cuts it has been maintaining since May this year, boosting bullishness in oil-trading circles.

The pandemic situation, however, remains grim, and it would not take much to end the rally. Global Covid-19 passed the 50-million mark last week, and the United States remains the most heavily affected country with more than 10 million total infections and a death toll of over 245,000.

Europe is also grappling with the virus, tightening movement restrictions further to contain the spread of the disease.

These are not exactly circumstances conducive to oil demand improvement, so once the elation caused by Pfizer’s announcement dissipates, oil prices would need another piece of good news to counter the pandemic updates and Libya’s intention to keep pumping as much oil as it can.

By Irina Slav for Oilprice.com

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