For the third week in a row the Energy Information Administration (EIA) has reported an increase in commercial crude oil inventories of 9.5 million barrels, to a total of 518.1 million barrels – exceeding the seasonal limit.
The report came a day after the API estimated commercial inventories had jumped by 9.94 million barrels.
The news is bound to cause worry among OPEC members who are being made painfully aware by U.S. shale boomers that the production cut agreement agreed to in November was a windfall for them – a windfall that they will make the best of while it lasts.
Though prices started the week on the rise, boosted by the latest positive update from OPEC, including the IEA praising the cartel for its 90-percent compliance rate, the API figures partially offset the rise and now the EIA figures might offset the rest. The weekly inventory reports coming from the U.S. are being increasingly criticized by industry observers for not reflecting the true picture of supply and demand in the country but still carry weight in swinging market sentiment, as traders follow them closely.
The EIA reported that refineries processed 15.5 million barrels of crude last week, down from the previous week’s 15.9 million bpd. Gasoline production stood at 9 million barrels in the week to February 10, with inventories adding 2.8 million barrels. In the week to February 3, gasoline inventories were down by almost a million barrels, taking off some of the pressure on prices. Related: Artificial Intelligence To Reveal The Biggest Secret In Oil
Lat week, after the EIA’s weekly report release, prices reacted in an unexpected fashion, adding about US$0.50 in the 30 minutes following the release. This suggests that the sense of irrelevance of these reports is growing, reinforced by price-positive developments elsewhere.
On the other hand, it may be a change of trader behavior, as detailed by the FT, which quoted a commodity consultant as saying “’Buy the builds’ is the new mantra.” This “mantra” is causing confusion on the market and a lot of suggestions as to who is behind this change in trading behaviors.
At the time of writing, Brent was trading at US$55.81 a barrel, while WTI was at US$53.10 a barrel, both down slightly.
By Irina Slav for Oilprice.com
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