Crude oil prices brushed off the Energy Information Administration inventory report today, which saw a 7-million-barrel build in crude oil inventories for the week to April 5.
The authority also reported a reduction in gasoline inventories a day after the American Petroleum Institute estimated those had declined by 7.1 million barrels. The EIA confirmed a draw, at 7.7 million barrels.
A week earlier, crude oil inventories had added 7.2 million barrels while gasoline inventories shed 1.8 million barrels.
In production, the EIA reported average processing rates of 16.1 million barrels daily, which compares with 15.8 million bpd a week earlier. Refineries churned out 10.2 million bpd of gasoline last week, up from 9.8 million bpd a week earlier. In distillate fuel, production averaged 5 million bpd, from 4.9 million bpd a week before that.
The authority also reported imports during the period averaged 6.6 million bpd with the four-week average at 6.7 million barrels daily.
The latest oil price rally recently got additional fuel from armed clashes between rival political factions in Libya, which may jeopardize crude oil production if they spread to the Oil Crescent. This has once again highlighted the effect every spike in geopolitical risk has on oil prices regardless of fundamentals.
Meanwhile, the crisis in Venezuela continues and Asian refiners suspend their imports of Iranian oil ahead of the expiry of sanction waivers. Tailwinds are strong.
The only bearish factor for prices in the last few days was a signal from Moscow that Russia may refuse to extend the production cuts it agreed to undertake in partnership with OPEC beyond their initial June end.
The news even managed to reverse the climb in oil benchmarks earlier this week but later Brent and West Texas Intermediate resumed their rise.
At the time of writing, Brent crude was trading at US$70.95 a barrel and West Texas Intermediate was changing hands for US$64.23 per barrel. Both were up from their opening prices this morning.
By Irina Slav for Oilprice.com
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And whilst the political turmoil in Libya has added a geopolitical dimension to oil prices, the impact on oil prices will be very limited since the global oil market has already factored in Libya’s oil production disruptions as a result of continued instability in the country”.
Bullish influences in the global oil market are battling with a few bearish factors but they are having the upper hand, hence the surge in oil prices.
One bearish influence is the failure of US sanctions against Iran’s and Venezuela’s ability to keep its oil production steady despite US sanctions.
Another is the reported news about Russia’s unwillingness to agree to a possible extension of the OPEC+ production cuts beyond June. President Putin is reported to have said that he was comfortable with oil prices where they are. But this could change at the last minute.
Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London