The Energy Information poured cold water on oil bull circles this week when it reported a crude oil inventory increase of 7.9 million barrels for the week to May 22. Fuel inventories posted mixed results, with gasoline down and distillate fuels up.
This compares with an inventory draw of 5 million barrels a week earlier and analyst expectations for a draw of 2.5 million barrels.
The EIA reported a modest draw in gasoline inventories, at 700,000 barrels, which compared with a build of 2.8 million barrels a week earlier. Gasoline production, the EIA said, averaged 7.2 million bpd last week, slightly up from the previous week.
In distillate fuels, the EIA reported an inventory increase of 5.5 million barrels for the week to May 22, after a sizeable build of 3.8 million barrels for the previous week. This, in turn, followed a weekly inventory build of 3.5 million barrels. Distillate fuel production last week averaged 4.8 million bpd, almost unchanged on a week earlier.
U.S. refineries processed an average 13 million bpd last week, slightly more than the previous week. This compared with 12.9 million bpd a week earlier, signaling the accelerating, but still slow recovery in oil demand in the world’s largest consumer as states reopen and economic activity begins to recover, too.
There are many doubts about how long it would take for the U.S. economy—and other large economies—to rebound to pre-pandemic levels and there is also a big question about oil demand. In fact, even some industry executives don’t see that rebounding fully to pre-crisis levels. However, for now, any positive news about oil consumption would have an immediate effect on a market starved of good news for weeks.
At the time of writing, West Texas Intermediate was trading at $32.85 a barrel with Brent crude at $34.66, both down after Wednesday reports that Russia may be considering easing its production cuts from July. The current OPEC+ production cuts stand at 9.7 million bpd, to be in effect until the end of June. There have also been reports the group may discuss extending them beyond that expiry date.
By Irina Slav for Oilprice.com
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