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Oil prices fell on Wednesday after having to 18-month highs as oil markets are anticipating OPEC cuts that are expected to be made starting January 1 next year. The American Petroleum Institute’s (API) weekly report showed build of 4.2 million barrels to the United States’ commercial crude inventories, instead of an expected 1.5 million-barrel draw.
The build comes after last week’s report from the Energy Information Administration (EIA) that showed a build of 2.3 million barrels of crude oil in inventories the week prior.
Gasoline inventories have seen several weeks of strong additions consumption started to fall because the winter weather has caused a bit of a lull in demand while refineries continue to churn out gasoline. API data this week shows a 2.8 million barrel draw to gasoline stockpiles whereas a one million barrel draw was predicted.
Crude levels at the Cushing, Oklahoma continue to increase, and are rising in line with analyst expectations, 528,000 barrels were added. Crude storage levels at this key site have been rising rapidly since October, and this week’s report confirms the fourth build in five weeks according to Zerohedge.
Lastly, API data sees a bullish 1.7 million barrel draw to distillate inventories.
Today’s API projections are expected to be confirmed by tomorrow’s EIA data. Markets in the meantime remain optimistic about OPEC's willingness to stick to the output cut deal and CFTC data now show that the OPEC bears are feeling the squeeze and have now cut back bearish bets on WTI to levels not seen since August 2014.
Related: The Unsustainable $60 Oil Spike In 2017
While oil traders seem extremely bullish, storage fundamentals indicate larger crude stockpiles than one year ago around this time of the year.
The price of WTI was down 0.45% to $53.66 at 3:55 PM CST, while Brent traded 0.25% lower at $55.95. Gasoline prices were up 0.80% to $1.6750.
By Tom Kool of Oilprice.com
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Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations