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Irina Slav

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Oil Falters On Unexpected Crude Inventory Build

Crude oil prices moved lower today after the Energy Information Administration reported a crude oil inventory build of 2.4 million barrels for the week to January 21.

This compared with a modest build of half a million barrels for the previous week.

In gasoline, the EIA estimated a build of 1.3 million barrels for the week to January 21, with production averaging 8.9 million barrels daily.

This compared with a 5.9-million-barrel build reported for the previous week, which extended a two-week build streak to three weeks. Production for the previous week averaged 8.7 million bpd.

In middle distillates, the agency estimated an inventory decline of 2.8 million barrels for last week, with production at 4.8 million bpd.

This compared with an inventory decline of 1.4 million barrels for the previous week, when production averaged 4.7 million bpd.

Refinery runs averaged 15.5 million barrels daily last week, which was almost unchanged on the previous week. Imports stood at 6.2 million bpd, compared with 6.7 million bpd for the previous week.

U.S. crude oil inventories have been on the decline for several weeks now, and the total is palpably below what’s normal for this time of the year, Reuters’ John Kemp noted in a recent column.

Kemp noted in the column that this points to a chronically undersupplied global oil market as OPEC+ and U.S. shale producers are either unable or unwilling to ramp up production more substantially.

Commercial U.S. crude oil inventories, Kemp, noted, had shed 273 million barrels since hitting a peak in July 2020, more than offsetting additions totaling 204 million barrels during the first wave of lockdowns after the pandemic hit.

Oil prices are reflecting these developments, with Brent crude topping $89 per barrel and West Texas Intermediate at over $86 per barrel at the time of writing. Besides the chronic undersupply in the U.S., there is also growing worry bout a global undersupply of crude oil, which is also helping keep prices higher, with forecasts for Brent topping $100 per barrel later this year multiplying.

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By Irina Slav for Oilprice.com

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