As confusion among oil traders persists regarding where oil prices are going to go from here, the Energy Information Administration scored one for the bears by reporting a crude oil inventory build of 4.7 million barrels in the week to May 17.
This compares with a build of 5.4 million barrels for the week before that and a 4-million-barrel draw a week before that: a mixed picture that does not help particularly in any attempt to gauge the immediate future of oil prices.
The EIA also reported a 3.7-million-barrel rise in gasoline inventories for the eek to May 17 and a 800,000-barrel rise in distillate fuel inventories. These compared with a 1.1-million-barrel draw in gasoline inventories a week earlier and a 100,000-barrel increase in distillate fuel inventories a week earlier.
In terms of production, refineries churned out 9.9 million bpd of gasoline last week, unchanged on a week earlier. Distillate fuel production averaged 5.2 million bpd, which compared with 5.3 million bpd in the previous week.
Average processing rates in the last week before Memorial Day and the official start of driving season stood at 16.6 million barrels daily, which compared with 16.7 million bpd a week earlier.
In the coming weeks and months demand for gasoline should rise although last year’s driving season served an unpleasant surprise to those expecting a major pick-up in demand. This year we might see a similar trend as [prices at the pump remain relatively high on the OPEC+ cuts and the rising tension in the Middle East. Related: OPEC+ Top Priority: Don’t Crash Oil Prices
Yet not all analysts believe the status quo is a stable one. While some analysts and investment banks are once again talking about Brent crude hitting US$80, US$90, or even US$100 a barrel, compared to the current level of around US$72 per barrel, others, namely JP Morgan, beg to differ.
Scott Darling, head of Asia Pacific oil and gas research at JP Morgan, told CNBC earlier this week the geopolitical risk premium to benchmarks was a short-term affair and the stable rise in U.S. oil production would eventually undermine its effect on prices.
At the time of writing, Brent was trading at US$71.87 a barrel, with West Texas Intermediate at US$62.59 a barrel, both down from opening.
By Irina Slav for Oilprice.com
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Such announcements have become part and parcel of US manipulation of oil prices. Still, their impact on oil prices is very short-lived. Soon oil prices will resume their upward trend underpinned by robust fundamentals of the global oil market, China’s thirst for oil continuing unabated with its oil imports projected to reach 11 million barrels a day (mbd) or even higher this year.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London