Amid a fresh wave of pessimism on oil markets following faster than expected oil output growth in Libya and reports that Russia will oppose any deeper cuts to production, the EIA offered oil bulls a break by reporting a major decline in crude oil inventories.
Commercial oil stockpiles in the U.S. fell by 6.3 million barrels lat week, after a minor, 100,000-barrel, draw registered by the EIA in the previous week. At 502.9 million barrels, inventories were within seasonal limits, the agency said.
This is much better than API’s estimate of a 5.76-million-barrel draw in commercial inventories, released yesterday, which provided some support for oil prices, pressured by the Libya and Russia news, and by a rebound in the greenback.
Gasoline inventories, which in the week to June 23 fell by almost a million barrels, boosting crude oil prices temporarily, last week declined more substantially, by 3.7 million barrels. Production of gasoline averaged 10.4 million barrels a day last week, versus 10.3 million barrels in the previous week.
Refineries operated at 93.6 percent of capacity, processing 17.1 million barrels of crude daily. This compares with 16.9 million bpd at 92.5 percent of capacity a week earlier.
EIA’s report will certainly help support prices for a while, but pressure is mounting on global markets. In the U.S., despite a one-rig decline in the total active tally last week, as reported by Baker Hughes, the number, at 940, was 509 rigs higher than it was on July 1, 2016.
Libya is said to have passed the one-million-bpd mark in crude oil output ahead of schedule: it was planned for the end of the month. Further increases are to be expected. Related: Saudis Refuse To Relinquish Grip On Key Asian Market
Russian government sources told Bloomberg Moscow will oppose any deepening of the oil production cuts agreed by OPEC and 11 other producers last November.
To top it all, Reuters data suggests that OPEC exports in June were 450,000 bpd higher than those in May, at 25.92 million bpd.
Such an environment is hardly price-stimulating, as suggested by hedge fund manager Andy Hall’s expectation that oil prices are not about to go up in any meaningful way. At the time of writing, WTI traded at US$46.44 a barrel and Brent crude was at US$49.08 a barrel.
By Irina Slav for Oilprice.com
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