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Oil Drops on Inventory Build

Crude oil prices moved lower today, after the U.S. Energy Information Administration reported an estimated inventory increase of 3.7 million barrels for the week to June 7.

The change compared with a weekly build of 1.2 million barrels for the previous week that was also accompanied by builds in fuel inventories, pressuring benchmarks.

Last week, the EIA estimated more builds in gasoline and middle distillate inventories.

In gasoline, the authority reported an inventory build of 2.6 million barrels for the seven days to June 7, with production averaging 10.1 million barrels daily. This compared with an inventory build of 2.1 million barrels for the prior week, when production stood at an average 9.5 million barrels daily.

In middle distillates, the EIA reported an estimated inventory increase of 900,000 barrels for the week to June 7, with production averaging 5 million barrels daily. This compared with an inventory increase of 3.2 million barrels for the previous week, when production averaged 5.1 million bpd.

A day before the EIA reported its latest inventory moves, the American Petroleum Institute estimated a crude inventory decline of 2.43 million barrels for the week to June 7, pushing oil prices higher after a weak start to the week.

The climb was also powered by two energy reports-by OPEC and by the EIA-which sounded an optimistic note on oil demand on Tuesday.

In its latest Short-Term Energy Outlook, the EIA revised up its oil demand growth outlook from 900,000 bpd to 1.1 million bpd for this year. OPEC, meanwhile, maintained its forecast for demand growth of over 2 million barrels daily.

"Despite announcing last week that it will start to phase out some of the voluntary cuts later this year, its forecasts suggest it should be easily accepted by the market," ANZ analysts wrote in a note after the release of OPEC's latest Monthly Oil Market Report, as quoted by Reuters.

By Irina Slav for Oilprice.com

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Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More