The American Petroleum Institute (API) reported a surprise draw of 2.739 million barrels of United States crude oil inventories for the week ending March 16, according to the API data. Analysts had a much different expectation prior to the count, instead anticipating a build of 2.556 million barrels in crude oil inventories-a discrepancy of over 5 million barrels.
Last week, the American Petroleum Institute (API) reported a modest build of 1.156 million barrels of crude oil, with a draw for gasoline that saw an inventory slip by 1.262 million barrels for the fuel.
This week, the API reported another draw for gasoline. This week, the API reported a draw of 1.0633 million in gasoline stockpiles, largely in line with the 2.008-million-barrel draw that analysts had expected.
Both benchmarks had climbed in afternoon trading on Tuesday, with the WTI benchmark up by $1.35 (+2.17%) at $63.48 a substantial $3 or so above last week's levels, while Brent traded up $1.25 (+1.90%) at $67.07 at 3:24 pm EST-also up by $3.
Behind the impressive price rise this week as Saudi Arabia threatens a tit for tat action that would see it create a nuclear weapon should Iran get its hands on the same. Other factors buoying prices include Venezuela's falling oil production-a continuation of a rather predictable trend over the last year as the country languishes under both a mountain of debt years of mismanagement. And much of the oil that Venezuela does manage to produce is sent on to creditors-most notably Russia and China.
Venezuela's oil production fell to just 1.548 million bpd in last month-a 52,400 barrel per day drop from January 2018, according to OPEC secondary sources. Most analysts agree that the downward spiral will continue to some degree.
Related: Experts Divided On Trump's Tariff Plan
Meanwhile, US crude oil production, which for the week ending March 9 increased to 10.381 million bpd is a sober reminder that OPEC's best foot forward in the fight against the inventory overhang will not go unchallenged, despite being propped up in part by floundering Venezuela.
Distillate inventories another draw this week of 1.926 million barrels. Analysts had forecast a decline of 1.746 million barrels.
Inventories at the Cushing, Oklahoma, site increased by 1.644 million barrels this week.
The U.S. Energy Information Administration report on oil inventories is due to be released on Wednesday at 10:30a.m. EST.
By 4:38pm EST, the WTI benchmark was trading up 2.25% on the day to $63.58 while Brent was trading up 1.90% at $67.07.
Julianne Geiger for Oilprice.com
More Top Reads From Oilprice.com:
Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More
Comments
It is very probable that they will report a build of a few million barrels in US oil inventories and if we are lucky we may also get a build of a few million barrels in gasoline stocks.
Saudi Arabia is on record saying a few years ago that if Iran acquires nuclear weapons, then Saudi Arabia will too. Therefore, we can discount the impact of this statement on the current rise in oil prices.
The difference between Iran’s and Saudi Arabia’s nuclear ambitions is that Iran has had an ongoing nuclear programme since 1975 under the Shah with support from the United States whilst Saudi Arabia has had no nuclear programme. Saudi Arabia has to acquire nuclear weapons from somewhere. However, Israel and the United States will never let Saudi Arabia or any Arab country acquire nuclear weapons because that will neutralize Israel’s nuclear weapons and upset the balance of power in the Middle East.
In the 1970s when the Shah started Iran’s nuclear programme, both the United States and the CIA knew his ultimate objective. Yet, they turned a blind eye as and when needed.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London