After a surprise 5.32-million-barrel inventory build reported by the American Petroleum Institute (API) weighed on oil prices yesterday, the Energy Information Administration (EIA) is reporting a build of 1.6 million barrels for the week ending March 23.
The markets, which have not had a chance to react to the EIA report as of the time of writing, could ease their downward trend given the nearly 4-million difference in build in the official figures.
However, they could also take this as confirmation of a reversal of expectations. Heading into Tuesday’s API data, expectations were for a draw of around 430 million barrels.
The authority said refineries processed 16.8 million bpd of crude in the reporting period, unchanged from a week earlier. Gasoline production averaged 10.3 million bpd, compared with 9.9 million bpd a week earlier, and distillate output averaged 4.8 million bpd last week, versus 4.5 million bpd a week earlier.
Gasoline inventories, the EIA said, fell by 3.5 million barrels in the week to March 23. In the week before that, gasoline inventories marked a decline of 1.7 million barrels. Distillate inventories last week shed 2.1 million barrels, compared with a decline of 2 million barrels in the prior week.
This week’s inventory data comes amid increasingly bullish talk from key analysts who view Big Oil as entering its “Golden Age”: a ‘restraint’ phase of backwardation, cost deflation and consolidation. The bullish mood is strengthened by persistent tensions in the Middle East with a focus on the possible reintroduction of U.S. sanctions against Iran.
One further factor that has supported prices this week was an announcement from OPEC that it plans to extend its cooperation with Russia over the next ten to twenty years. This has been taken to mean that the production cuts applied by the cartel, Russia and ten other producers could continue beyond the medium term. However, nothing is certain, especially with higher prices. Related: OPEC Scrambles To Justify Output Cuts
On the other hand, as evidenced on numerous occasions, one surprise build report from the API is enough to push prices down and this is exactly what happened yesterday, when API’s latest estimate dragged Brent back below US$70 a barrel, after a combination of tailwinds had pushed the international benchmark above this threshold for the first time in three months.
EIA’s figures may have the same effect later today. At the time of writing Brent was trading at US$68.78 a barrel and WTI was changing hands at US$64.44, both down by around a percentage point from yesterday’s close.
By Irina Slav for Oilprice.com
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But, this market is stained with speculators as usual. Not sure any real progress will be made until the shadow of speculation clears a bit.