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Oil Price Rally Reverses As Inventories Balloon

The American Petroleum Institute (API) reported on Tuesday a build in crude oil inventories of 4.146 million barrels for the week ending November 27.

Analysts had predicted an inventory draw of 2.358 million barrels for the week.

In the previous week, the API reported a build in oil inventories of 3.8-million barrels, after analysts had predicted a much smaller build of just 127,000 barrels.

Oil prices were trading down on Tuesday afternoon before the API's data release despite daily news of Covid-19 vaccine progress, after OPEC on Monday ended its meeting without a resolution on its production plans for 2021, and delayed a meeting set for Tuesday until later in the week to allow more time for deliberations of the sticky subject. OPEC finds itself in a precarious situation again—and make no mistake, it is imperative for the group to hold the group together and present a united front for whatever plan it hatches. The oil price fall on Tuesday is a small preview into what will happen to prices should the deal fail.

In the runup to Tuesday's data release, at 2:48 p.m. EDT, WTI had fallen by $0.80 (-1.76%) to $44.54, down roughly $0.30 per barrel on the week. The Brent crude benchmark had fallen on the day by $0.49 at that time (-1.02%) to $47.39—up about $0.40 per barrel on the week.

U.S. oil production was up for the week ending November 20, at 11.0 million bpd, according to the Energy Information Administration—2.1 million bpd lower than the all-time high of 13.1 million bpd reached in March.

The API reported a build in gasoline inventories of 3.402 million barrels of gasoline for the week ending November 27—compared to the previous week's 1.3-million-barrel build. Analysts had expected a 2.386-million-barrel build for the week.

Distillate inventories were up by 334,000 barrels for the week, compared to last week's 1.8-million-barrel draw, while Cushing inventories fell by 132,000 barrels.

At 4:33 p.m. EDT, the WTI benchmark was trading at $44.56, while Brent crude was trading at $47.36.

By Julianne Geiger for Oilprice.com

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