After a surprise crude oil inventory draw reported by the American Petroleum Institute, the Energy Information Administration strengthened the good mood by confirming the draw, and a much larger one than API’s 907,000 barrels.
The authority reported inventories had fallen by 1.6 million barrels in the week to February 16. This is the first inventory draw in four weeks, after the EIA reported a combined build of 10.5 million barrels for the period January 22 to February 9.
At 420.5 million barrels, the EIA said, crude oil inventories are in the lower half of the seasonal average, which should stimulate optimism despite a consistent growth in production in the shale patch and upcoming refinery maintenance season that will certainly affect inventories.
Gasoline production, the EIA also said, was higher in the week to February 16, at 10.1 million barrels daily, from 9.6 million bpd a week earlier. Inventories of the fuel rose by 300,000 barrels, versus a 3.6-million-barrel build a week earlier. This is the third weekly gasoline inventory increase in as many weeks.
Meanwhile, oil prices have been depressed by a stronger U.S. dollar, propped up by the minutes of the last FOMC meeting released by the Federal Reserve on Wednesday. The minutes suggested the Fed remains hawkish on the U.S. economy, especially after the much higher than expected January inflation reading, so it is on track to lift interest rates at least three times by the end of the year.
Higher interest rates are bullish for the dollar and what is bullish for the dollar is usually bearish for the commodities that are traded in it, and oil is the most notable example of this inverse relationship. At the time of writing, ahead of the EIA release, Brent crude traded at US$65.39 a barrel, while West Texas Intermediate changed hands at US$61.98 a barrel, up 0.37 percent and 0.49 percent, respectively.
By Irina Slav for Oilprice.com
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Is it not a great coincidence that the EIA announcement of a build in oil inventories of 10.5 mbd for the period January 22 to February coincided with the slide of oil prices from almost $70 to $62.
It has become apparent for a long time that there is such an uncanny correlation between oil prices trending downwards and announcements by the EIA of increases in US shale oil production and rises in US oil inventories to be coincidental.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London