Amid fresh hopes that the extension of the OPEC production cut deal might actually do the trick, the Energy Information Administration reported a fresh draw in crude oil inventories for the week to May 12, at 1.8 million barrels.
A day earlier, the American Petroleum Institute had estimated commercial oil inventories went up by 882,000 barrels, in striking contrast to analyst expectations, which were very optimistic, for a draw of 2.3 million barrels. The EIA figures might go some way towards restoring optimism.
The EIA reported refinery runs at 17.1 million barrels per day, compared to 16.8 million bpd the week before, operating at 93.4 percent of capacity. Gasoline production averaged a bit over 10 million bpd, from 10.1 million bpd in the previous week. Inventories of the most popular fuel in the U.S. fell by 400,000 barrels. For the week to May 5, the EIA had reported a 200,000-bpd draw in gasoline stockpiles.
It seems that optimism about global supplies will not last long despite OPEC members’ assurances that the nine-month extension, to be officially announced at the group’s Vienna meeting next Thursday. EIA’s figures might help but, again, only temporarily, as doubts about the state of oil’s fundamentals abound. Related: Disruptive Tech: Electric Airplanes Could Destroy The Automotive Industry
In its latest Oil Market Report, for example, the International Energy Agency said that although OPEC and its partners had gone some way towards shrinking supply, there was more work to do and global inventories were unlikely to fall within the limits of the five-year average before 2018.
The agency warned that two exempt OPEC members, Libya and Nigeria, could boost their output significantly in the second half of the year, undermining production-cut efforts. Of course, U.S. shale remains the strongest headwind for prices, but there is also worry that if OPEC, Russia, and the other participating countries leave quotas at the current level, the stockpile drawdown will take longer. Some industry observers have suggested that it’s necessary to cut deeper, but it is unlikely that OPEC and its partners will agree to that.
By Irina Slav for Oilprice.com
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