The Energy Information Administration poured ice cold water on the budding hope that inventory levels in the world’s largest oil consumer may be normalizing, by reporting a 3.3-million-barrel build in commercial stockpiles for the week to June 2.
That happened a day after the API reported a draw of 4.62 million barrels, with analysts expecting the API to report a draw of 3.5-million barrels for last week—but even with expectations for another draw in inventories, prices failed to show any significant enthusiasm, jumping briefly before sagging down again on Tuesday. EIA’s figures will likely strengthen the downward trend.
The EIA reported that at 513.2 million barrels, crude oil inventories were within seasonal limits, however, with refineries processing over 17.2 million barrels of oil daily. Gasoline output averaged 9.9 million barrels per day, down from 10.4 million bpd in the week before. Gasoline inventories ahead of the start of driving season were also up, by 3.3 million barrels, bucking a two-week upward streak.
Imports averaged 8.3 million barrels daily, up by 356,000 bpd from the previous week, but we may see declines in the coming weeks after Saudi Arabia announced its plans to cut shipments to one of its biggest clients as it continues to shrink output in line with the recently extended OPEC-wide production cut agreement. Related: Is $75 Oil Still Possible?
Oil prices fell off a cliff following the report
Meanwhile, amid rising tensions in the Middle East after Saudi Arabia, Egypt, the UAE, and Bahrain severed all diplomatic ties with the world’s top LNG exporter Qatar over allegations of the emirate supporting terrorism, another event shook the region: two terrorist attacks on the Iranian parliament and the mausoleum of Ayatollah Khomeini in Tehran left 12 dead and a lot more injured. Islamic State took responsibility for the attacks.
Several hours after the news broke, Brent and WTI were both down, which highlights how difficult OPEC’s situation has become, with little hope that global supply will decline in any meaningful way anytime soon, especially after it turned out that the cartel’s May output rose for the first time this year, on the back of recovering production in Nigeria and Libya.
By Irina Slav for Oilprice.com
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