Crude oil prices moved lower today after the Energy Information Administration reported a crude oil inventory build of 800,000 barrels for the first week of December. Besides it, the EIA also reported hefty builds in gasoline and distillate fuel inventories.
The crude oil increase compared with a 4.9-million-barrel inventory draw estimated for the last week of November—the first draw in five weeks. Analysts had been optimistic for the week, expecting a draw of over 3 million barrels but API’s Tuesday report dampened the optimism somewhat, by reporting an unexpected build of more than 1.4 million barrels for the first week of December.
Prices were already depressed even before the API report, however. Once again trade war worries and pessimism about global economic growth came to outweigh the reaction to the OPEC+ decision to deepen cuts. The short life of this reaction was also due to the fact that the agreed cuts only sound deep on paper but it remains to be seen how much they will contribute to the actual slim-down of global supplies.
“We concluded that in a period of lower demand it is reasonable to further cut production, so our total cut deepens to 300,000 bpd,” Russian Energy Minister Alexander Novak said at the meeting last week.
Demand for oil is indeed slow but next year it could pick up and that is when the effectiveness of the OPEC+ cuts will become evident or not. Related: These Secretive Oil Companies Control $3 Trillion In Wealth
In the meantime, the EIA reported a gasoline inventory increase of 5.4 million barrels for the week to December 4, versus an increase of 3.4 million barrels for the previous week. Gasoline production last week averaged 9.8 million bpd, compared with 9.9 million bpd a week earlier.
Distillate fuel inventories rose by 4.1 million barrels in the reporting period. This compares with an increase of 3.1 million barrels for the prior week. Production in the week to December 4 averaged 5.2 million bpd, compared with 5.3 million bpd a week earlier.
Brent crude was trading at $63.91 a barrel and West Texas Intermediate was at $58.87 a barrel at the time of writing, both down from yesterday’s close.
By Irina Slav for Oilprice.com
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