Crude oil headed lower today, reversing a rally after the Energy Information Administration reported a build in oil inventories of 3.5 million barrels for the week to January 24.
Analysts had expected a draw of 460,000 bpd, after last week the EIA reported a draw of 400,000 bpd for the seven days to January 17.
At 431.7 million barrels, crude oil inventories in the United States are a little below the five-year average for this time of the year.
The EIA also reported a 1.2-million-barrel build in gasoline inventories as well, versus a build of 1.7 million barrels for the previous week. Gasoline production averaged 9.2 million bpd, down from 9.5 million bpd a week earlier.
Distillate fuel inventories fell by 1.3 million barrels last week. This compared with a 1.2-million-barrel decline a week earlier. Distillate fuel production averaged 5 million bpd in the week to January 24, unchanged from the previous week.
A day before the EIA reported inventory figures, the American Petroleum Institute once again took forecasters by surprise reporting a draw of 4.37 million barrels in U.S. oil inventories when analysts had expected a build of almost 500,000 bpd.
Oil prices rose on the API report but they were already on the mend Tuesday, after sources from OPEC said the cartel and its partners were considering an extension of the oil production cuts until June and that they might further deepen the cuts to compensate for the headwinds blowing from the direction of demand.
The coronavirus outbreak that started in China but has spread to more than a dozen other countries was the main culprit. With demand for air travel immediately hit and quarantines in China discouraging other forms of travel, too, the expected impact on oil demand could be significant. In fact, according to Barclays, it could shave off $2 off a barrel of oil.
Yet talk of a production cut extension and/or deepening has done the job and prices are trending higher for the time being. At the time of writing, Brent crude was trading at $58.75 a barrel and West Texas Intermediate was at $53.24 a barrel.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More