Crude oil prices were stubbornly down following the Energy Information Administration reported a modest crude oil inventory draw of 400,000 barrels for the week to January 17.
This compared with analyst expectations of a 1.117-million-barrel inventory decline and a draw of 2.5 million barrels reported a week earlier. Last week, however, oil prices were pressured by the EIA’s reporting of hefty builds in both gasoline and distillate fuel.
For last week, the authority reported a build in gasoline, of 1.7 million barrels, and a 1.2-million-barrel decline in distillate fuel inventories. This compared with a build of 6.7 million barrels in gasoline inventories a week earlier and an 8.2-million-barrel increase in distillate fuels.
Gasoline production last week averaged 9.5 million bpd, versus 9.3 million bpd a week earlier.
Distillate fuel production stood at 5.0 million bpd, down from 5.2 million bpd a week earlier.
At the time of writing both Brent crude and West Texas Intermediate were trending lower after on Wednesday they closed at a seven-week low, pressured by concern about oversupply stemming from slackening demand. The demand decline is expected to be brought about by a drop in jet fuel demand as the coronavirus outbreak in China discourages travel for the Chinese New Year specifically and air travel in general.
Comments from authorities are not helping either. The head of the International Energy Agency, Fatih Birol, said at the World Economic Forum in Davos that he expected abundant supply to continue offsetting the potential price positive effect of production outages and political events in the Middle East.
The EIA itself earlier this week said it expected crude oil production in the shale patch to continue increasing, adding 22,000 bpd next month to reach a total 9.2 million bpd. The increase will come from the Permian and the Bakken, which will together add 50,000 bpd to their daily average, more than offsetting declines across the rest of the shale patch.
At the time of writing, Brent crude traded at $61.48 a barrel, with WTI at $55.05 per barrel. Both were down from opening, by nearly 3%.
By Irina Slav for Oilprice.com
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Despite the start of a gradual depletion of the glut estimated at the end of 2019 at 4.0-5-0 million barrels a day (mbd), it will take the whole of 2020 before the glut is reduced by half.
In other words, the current glut is still big enough to undermine OPEC+ production cuts, nullify the impact of geopolitics and outages like in Libya on oil prices and absorb even new US-Iran escalation.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London