Amid supply disruptions in Libya and strengthening expectations of an OPEC production cut extension, the Energy Information Administration reported commercial oil inventories in the U.S. had gone up by 900,000 barrels in the week to March 24.
Yesterday, the American Petroleum Institute estimated inventories had added 1.91 million barrels in the reporting period, largely in line with analyst expectations of a 2-million-barrel build.
The EIA also said that total commercial inventories stood at 534 million barrels, close to the seasonal upper limit. In the previous week, these stood at 533.1 million barrels.
Refineries processed an average of 16.2 million barrels daily, compared with 15.8 million bpd in the previous week, producing 10 million barrels of gasoline, up from 9.8 million barrels in the week to March 17. Inventories of the fuel went down by a hefty 3.7 million barrels, giving some cause for optimism.
The last four months have seen mostly builds in U.S. inventories, as reported on a weekly basis by both the EIA and the API, contributing substantially to the rise of bearish sentiment among investors and dampening hopes of further oil price strengthening.
However, the recent clashes between armed groups in Libya eventually led to a suspension of production at two fields, together producing 252,000 bpd – almost a third of the country’s 700,000-bpd production rate. The news sparked some optimism among traders, but that will be short-lived unless OPEC decides to extend its production cut agreement into the second half of the year. Related: OPEC Weighs Extension As Oil Markets Start To Lose Their Nerve
The chances of this happening are increasing, although Saudi Arabia has declared it will only sign up for it if global inventories continue to exceed the five-year average when the cartel meets next in late May.
Meanwhile, UAE’s Oil Minister Suhail Al-Mazrouei said that the current glut is a result of seasonal factors in the U.S.: it is refinery maintenance season and crude oil stockpiles are increasing. Once maintenance ends, inventories should start going down.
This wouldn’t explain how U.S. inventories kept on growing before maintenance season, however, so it’s more likely than not that Gulf producers are trying their best to arrest the price slide, and the situation in Libya is helping.
By Irina Slav for Oilprice.com
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