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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Major Build In Crude Inventories Sends Prices Tumbling

U.S. crude oil inventories went up by 8 million barrels in the week to January 18, the Energy Information Administration said in its latest weekly petroleum status report.

At 445 million barrels, these were about 9 percent  above seasonal limits, the authority said, a day after the American Petroleum Institute estimated inventories had risen by 6.55 million barrels, which apparently surprised market players, as do most API weekly inventory releases these days.

In fuels, the EIA reported a build of 4.1 million barrels for gasoline and a decline of 600,000 barrels for distillate fuel. This compares with a 7.5-million-barrel increase for gasoline inventories a week earlier and a 3-million barrel build in distillates.

Gasoline production averaged 9.6 million barrels daily last week, and distillate fuel production averaged 5.2 million bpd, down from 5.4 million bpd the previous week. Refineries processed an average 17 million bpd of crude oil in the reporting period, versus 17.2 million bpd in the previous week.

Oil prices began to settle this week, despite persistent worry about the global economy, after reports emerged that Asian government were considering fiscal stimulus measure in anticipation of the slowdown.

A forecast from the Energy Information Administration that shale oil production will continue growing acted as a tailwind for WTI, countering warnings from elsewhere that shale growth will slow down this year.

This year, the EIA expects U.S. production to grow by 1.7 million bpd, with the rise slowing down further in 2020 to 1.2 million bpd, the agency said in its latest Short-Term Energy Outlook released last week. Meanwhile, other forecasts, from the IEA and OPEC, also see U.S. oil leading the rise in supply this year, but they also see global demand stable at 1.3 million and 1.4 million bpd, respectively, a slowdown from 2018 but not a too significant one.

At the time of writing WTI was trading at US$52.82 a barrel, with Brent crude at US$60.96 a barrel.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on January 24 2019 said:
    It couldn’t be coincidental that every time the oil price starts to rise, the US Energy Information Administration (EIA) announces either a huge build-up in crude and product inventories or a big rise in US oil output or both.

    This time US crude oil and products inventories went up by 8 million barrels and 4.1 million barrels respectively in the week to January 18 according to the EIA.

    However, an addition to inventories could only happen in 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 more than 8 million barrels a day (mbd). The other is that the US is taking advantage of low oil prices by importing so much thus increasing its inventories. If this is the case, then the rising demand for imports should push oil prices up. A third is that US oil demand is declining thus adding to the stocks. This is not true either as US oil demand and gasoline consumption have been steadily growing annually by an average of 1.23% and 2.1% respectively for the last four years.

    The United States is also able to manipulate the oil prices through the petrodollar by which oil is priced. Raising the value of the dollar exerts a downward pressure on global oil demand and thus on oil prices. Conversely, by devaluing the dollar, the actual purchasing power of the oil revenues of members of OPEC declines against other world currencies forcing them to raise oil production to maintain revenue thus depressing the oil price.

    And yet, President Trump has been relentlessly accusing OPEC of manipulating oil prices while the US Congress has been pushing a bill called “No Oil Producing and Exporting Cartels Act,” or NOPEC, that would let the US sue OPEC for an alleged oil price fixing.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Mitch Farney on January 24 2019 said:
    For a net increase of 1.6 mb/d of oil imports, that isnt a bad build. 11 million increase in imports from the week before.

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