Ahead of official U.S. crude oil inventory data, which will be out on Thursday, a day late due to the Memorial Day holidays this week, S&P Global Platts is predicting that inventory will have dropped for a second straight week.
S&P Global Platts predicts that the Energy Information Agency (EIA) will report a 3.1-million-barrel decline in U.S. crude oil stocks tomorrow, for the week ending 27 May. Also tomorrow, OPEC will meet in Vienna, where the Middle East is again dangling an output freeze before the market.
A survey of analysts for S&P Global Platts also predicted that refinery utilization will have increased for the week by 1.1 percent, while gasoline stocks should show a 1.4-million-barrel draw. Distillate stocks are expected to have dropped by 400,000 barrels.
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According to S&P Global Platts Oil Futures Editor Geoffrey Craig: "Another weekly drawdown would mark the first consecutive decline since September, providing further price support."
Oil prices took a hit however after the American Petroleum Institute reported a 2.35 million barrel crude build whereas a 2.5 million draw was expected. The API reported a draw in distillates and gasoline stockpiles, most likely because driving season in the U.S. has started.
Official U.S. crude oil inventory data released last week confirmed a significant drop in stockpiles, showing a drawdown of 4.2 million barrels from the previous week.
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"At 537.1 million barrels, U.S. crude oil inventories are at historically high levels for this time of year," the Energy Information Administration (EIA) said in its last weekly status report.
This pushed oil prices up close to $50.
Regarding contango, S&P Global Platts analysts also noted that a tight spread between Brent crude and West Texas Intermediate (WTI) "could lure more barrels to the U.S. for refining purposes, but conversely, the incentive to export crude to the U.S. for storage has dissipated."
By Charles Kennedy of Oilprice.com
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