Oil Plunges After API Reports Large Unexpected Crude Inventory Build

The American Petroleum Institute (API) estimated on Tuesday a large crude oil inventory build, of 8.731 million barrels for the week ending May 22.

Analysts had predicted an inventory draw of 2.50 million barrels.

In the previous week, the API estimated a draw in crude oil inventories of 4.8 million barrels. Meanwhile, the EIA’s estimates were for wildly different, with the industry body reporting last week that the inventories had fallen by 5 million barrels.

WTI was trading down on Wednesday afternoon prior to the API’s data release, although the outlook for a rebalanced oil market is more positive than it was even just two weeks ago, with many U.S. states easing lockdown restrictions and the world’s largest oil producers, including Saudi Arabia, Russia, and the United States, cutting production by more than many market analysts had predicted would be the case.

Oil production in the United States has now fallen from 13.1 million bpd on March 13 to 11.5 million bpd for May 15, according to the Energy Information Administration—a drop of 1.6 million bpd—more than OPEC’s production cut agreement from last year.

At 2:19 pm EDT on Tuesday the WTI benchmark was trading down on the day by $1.35 (-3.93%). The price of a Brent barrel was trading down on Wednesday as well, by $1.29 -(3.57%), at $34.88.

The API reported a build of 1.120 million barrels of gasoline for week ending May 22—compared to last week’s 651,000-barrel draw. This week’s draw compares to analyst expectations for a 33,000-barrel draw for the week.

Distillate inventories were up by 6.907 million barrels for the week, compared to last week’s 5.1-million-barrel build, while Cushing inventories saw a draw of 3.370 million barrels.

At 4:39 pm EDT, WTI was trading at $32.7 while Brent was trading at $34.68.

By Julianne Geiger for Oilprice.com

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