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Oil Jumps Despite Major Crude Inventory Build

Crude oil prices moved lower today after the Energy Information Administration reported a crude oil inventory build of 9.9 million barrels for the week to October 7, but the move lower didn't last long.

At 439.1 million barrels, U.S. crude oil inventories are 1 percent below the five-year average for this time of the year. A week earlier, inventories recorded a draw of 1.4 million barrels.

In fuels, the EIA reported mixed changes.

Gasoline stocks added 2 million barrels last week, which compared with a 4.7-million-barrel decline for the previous week. Production averaged 9.2 million barrels daily last week, which compared with 10 million bpd a week earlier.

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In distillate fuels, the EIA estimated an inventory draw of 4.9 million barrels for the week to October 7. This compared with a draw of 3.4 million barrels for the previous week.

Distillate fuel production averaged 4.9 million barrels daily last week, which compared with 5.2 million bpd the previous week.

Refineries processed an average of 15.7 million bpd last week, operating at a utilization rate of 89.9 percent.

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Even so, distillate stocks remain rather depleted, both in the United States and in Europe. This has led to a spike in diesel prices on both sides of the Atlantic, with Bloomberg reporting prices of $190 on a barrel-equivalent basis in California and nearly $170 in the New York Harbor.

“The global diesel market is very strong at the moment,” Mark Williams, research director at Wood Mackenzie told Bloomberg.

“Higher diesel prices have the potential to create even stronger inflationary pressures, especially if the current price spike is sustained, adding significant downside risk to demand and increasing the chances of a global recession,” he added.

Meanwhile, oil prices remain subdued as recession fears weighed down on them despite the OPEC+ decision to reduce production by about 1 million bpd and production targets by 2 million bpd.

The decision sparked a heated reaction from Washington, which is pointing the finger at Saudi Arabia saying it has sided with Russia. Riyadh has responded that the motives for the decision were purely economic.

By Irina Slav for Oilprice.com

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