With oil prices at multi-week highs thanks to reports from OPEC and demand outlook, some more good news is always appreciated but the EIA has refused to play along, reporting a build of 900,000 barrels in crude oil inventories for the week to October 20.
The authority also reported a decline in gasoline stockpiles for the period, of 5.5 million barrels, which was only to be expected as refinery maintenance season begins and production declines.
Even without the element of surprise, however, market participants seem to welcome every news report of any sort of inventory decline with enviable enthusiasm, suggesting the bullish sentiment is still strong.
Yesterday, for example, after the API reported a draw of 5.75 million barrels in gasoline stockpiles, versus analyst expectations of a 2.3-million-barrel decline. This decline, again, is more likely a result of lower refinery activity than an increase in production but traders are apparently oblivious to the causes behind inventory movements as long as these movements are in the right direction.
Of course, there has also been a string of lower rig counts that has served to reinforce this sentiment as it suggests the growth in shale oil production is slowing down, spelling a potentially tighter global market.
Another tailwind is OPEC’s negotiations on extending the oil production cut agreement that is currently supposed to end on March 2018. Any extension discussion, however, should also involve plans on handling production after the final expiration date. OPEC is currently making these plans ahead of its Vienna meeting net month. Related: Can Venezuela Avoid Default?
Regardless of international oil developments, including the conflict in Kurdistan, the fall/winter season is a bearish one for oil prices as consumption declines and so do refinery runs.
Last week, the EIA said, refineries processed an average 16 million barrels of crude, versus 15.4 million bpd in the week before, producing 9.9 million barrels of gasoline daily, down from 10 million bpd in the week before. The facilities ran at 87.8 percent of capacity, versus 84.5 percent in the prior week but this should fall further in the coming weeks as maintenance season sets in.
By Irina Slav for Oilprice.com
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