Crude oil prices moved higher today after the Energy Information Administration reported a draw in crude oil inventories of 4.2 million barrels for the week to May 25, a day after the API pressured benchmarks by estimating an unexpected inventory increase of 1 million barrels for the period.
In gasoline, the EIA reported a 500,000-barrel increase in inventories, with average daily production at 10.4 million barrels. This compares with a 1.9-million-barrel build in gasoline inventories a week earlier and a daily production rate of just over 10 million barrels a week earlier.
Distillate inventories, the EIA said in this week’s report, were up 600,000 barrels, with daily production averaging 5.3 million barrels. A week before, distillate inventories booked a 1-million-barrel draw and a daily production rate of 4.9 million barrels.
Brent crude and WTI started sliding last week on reports that Russia and Saudi Arabia were discussing an increase in oil production but recouped some of their losses this week, after OECD inventories, according to OPEC, fell below the five-year average, which was the goal of the 2016 production cut agreement. Related: Why U.S. Oil Exports Are Only Heading Higher
However, the surprise inventory build reported by API weighed on benchmarks, yet again proving the oil market is suffering from excessive price volatility. This may ease in the coming weeks as trader start pricing in an increase in OPEC and Russia production, although all OPECF and Russia sources that have commented on the topic have made it clear no decision had been made yet and will only be made at the June 22 meeting of the OPEC+ group.
At the time of writing, Brent crude was trading at US$78.27 a barrel, with WTI at US$67.20. Some analysts believe that despite the possibility of higher OPEC and Russia production, oil’s fundamentals remain bullish for the time being. U.S. production is also likely to have risen last week, from 10.725 million bpd last week.
By Irina Slav for Oilprice.com
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