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The American Petroleum Institute (API) reported a crude oil inventory build of 2.514 million barrels for the week ending February 1, close to analyst expectations that predicted a build in crude oil inventories to the tune of 2.179 million barrels.
Last week, the API reported a surprise crude build of 2.098 million barrels. A day later, the EIA confirmed the inventory build, but a smaller one at 900,000 barrels.
Oil prices were trading down prior to the data released on Tuesday as investors weigh price support from OPEC’s zealous adherence to the promised production cuts and the dire situation in Venezuela against recent inventory builds in the United States and fears of weak demand growth in the future. Further confusion to oil prices came later in the day on news from the Wall Street Journal that OPEC is looking to officially align itself with a ten-nation group led by heavyweight oil producer Russia to better manage the oil market—a proposition that will be discussed the week of February 18 in Vienna.
At 3:41pm EST on Tuesday, WTI was trading $0.80 down on the day (-1.47%) per barrel at $53.76—a rise of less than $1 per barrel week on week. Brent crude was trading down $0.46 (-0.74%) at $62.05—a $1 increase week over week.
The API this week reported a build in gasoline inventories for week ending February 1 in the amount of 1.731 million barrels. Analysts again were close in their predictions, estimating a build of 1.601 million barrels for the week.
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US crude oil production as estimated by the Energy Information Administration showed that production for the week ending January 25—the latest information available—averaged 11.9 million barrels per day for the third week in a row.
In the third build for the week, distillate inventories increased this week by 1.141 million barrels, compared to an expected draw of 1.814 barrels.
Crude oil inventories at the Cushing, Oklahoma facility rose by 889,000 barrels for the week.
The U.S. Energy Information Administration report on crude oil inventories is due to be released on Wednesday at 10:30a.m. EST.
By 4:41pm EST, WTI was trading down at $53.66 and Brent was trading down at $62.00.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.
Prior to the data release by the API, oil prices were trading yesterday at $62-$63 a barrel as a result of claims that US sanctions against Venezuela could adversely impact the country’s oil exports.
However, an addition to inventories could only happen in three ways: one if the United States is producing far beyond its oil needs. This is not the case otherwise it wouldn’t have had to import an estimated 9.6 million barrels a day (mbd) in 2018. The other is that the US is taking advantage of low oil prices to import more crude thus increasing its inventories. If this is the case, then the rising demand for imports should push oil prices up. A third is that US oil demand is declining thus adding to the stocks. This is not true either as US oil demand and gasoline consumption have been steadily growing annually by an average of 1.23% and 2.1% respectively for the last five years. Such ploys by the EIA and the API are intended to depress oil prices and they are part and parcel of US manipulation of oil prices.
And yet, President Trump has been relentlessly accusing OPEC of manipulating oil prices while the US Congress has been pushing a bill called “No Oil Producing and Exporting Cartels Act,” or NOPEC, that would let the US sue OPEC for an alleged oil price fixing. OPEC should preempt and sue the United States at the WTO for manipulation of oil prices to achieve unfair benefits for its economy at the expense of the economies of OPEC members and other oil-producing nations around the world.
And despite a spate of almost daily pessimistic reports about a slowdown in US shale oil production, the EIA never stopped hyping about rising US oil production. The latest claim is that US oil production for the week ending January 25 averaged 11.9 mbd. It also claimed that US production averaged 11.7 mbd in 2018 but changed it later to 10.9 mbd.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London