Crude oil prices rose further today after the Energy Information Administration reported a crude oil inventory draw of 8 million barrels for the last week of 2020, despite hefty builds in fuel inventories.
The report came a day after the American Petroleum Institute estimated a relatively modest draw in oil inventories, at 1.66 million barrels. This draw, however, was accompanied by substantial inventory builds in gasoline and middle distillates: 5.47 million barrels and 7.14 million barrels, respectively.
The EIA, for its part, estimated gasoline stocks had added 4.5 million barrels in the week to January 1, with production averaging 8 million bpd. This compared with a draw of 1.2 million barrels for the previous week and production of 9.2 million bpd.
In middle distillates, the authority reported an inventory build of 6.4 million barrels and production of 4.8 million bpd. This compared with an inventory increase of 3.1 million barrels for the previous week and production averaging 4.6 million bpd.
Prices have been on a tear this week, jumping particularly sharply yesterday, after Saudi Arabia announced it would implement unilateral additional oil production cuts of 1 million bpd on top of its OPEC+ mandated cuts.
"We do that willingly and we do that with the purpose of supporting our economy, the economies of our colleagues," Saudi Energy Minister Abdulaziz bin Salman told a news conference after yesterday’s OPEC+ meeting, as quoted by CNN. "We did not ask any country to come forward and do any cuts."
Indeed, although the extended cartel agreed to leave current production levels relatively flat overall, Russia and Kazakhstan will ramp up their output in February and March.
Despite the quick reaction of prices to the Saudi news, it remains to be seen whether the additional cut will have a lasting effect on supply in the context of still rising numbers of Covid-19 infections, which will continue undermining demand.
By Irina Slav for Oilprice.com
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Certainly US oil refineries are *hard at work.*(trying to get back to pre-covid 19 levels of production).
Still, a draw of such a size aids the oil price surge.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London