Crude oil prices fell further today, with WTI prices falling to 18-year lows, after the Energy Information Administration's latest weekly inventory report that estimated a 2-million-barrel build for the week to March 13.
The agency reported that at 453.7 million barrels, crude oil inventories in the United States were 3 percent below the five-year average for this time of the year.
Analysts had expected an inventory build of 2.94 million barrels, after last week the EIA reported an inventory increase of 7.7 million barrels, adding to pressure on prices.
This week, the authority also reported an inventory decline of 6.2 million barrels in gasoline and a fall of 2.9 million barrels in distillate fuels. This compared with an inventory draw of 5 million barrels for gasoline a week earlier, and a decline of 6.4 million barrels in distillate fuel inventories.
Refineries last week processed an average of 15.8 million bpd, compared with 15.7 million bpd a week earlier. Gasoline production averaged 10 million bpd, a little higher than a week earlier. Distillate fuel production averaged 4.7 million bpd, almost unchanged on the previous week.
We may start seeing more inventory declines further down the road this year as shale oil producers begin to idle rigs to cut spending in response to the oil price collapse that followed the start of the latest price war. Several companies have already announced spending cuts and analysts believe worse is still to come.
"This is the financial crisis for oil," Ian Nieboer, head of macroeconomic research at RS Energy Group, told the Financial Times. "Except the producers aren't too big to fail." Related: Why The Oil Price Crash Won't Save Airlines
According to Goldman Sachs' Jeffrey Currie, this time the crisis could be worse than it was in 2014, when Saudi Arabia also upped production in an attempt to kill shale.
"The biggest difference is that these producers are all in a much weaker position," Currie told the FT. "Their balance sheets are weaker, their stock prices are lower."
If the current price trends continue through the end of the year, many shale producers will go under, analysts predict, and production will start declining, eventually contributing to a rebalancing of the market.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More