Surprise Crude Draw Sends Oil Prices Soaring

The American Petroleum Institute (API) estimated on Tuesday a small crude oil inventory draw of 483,000 barrels for the week ending May 29.

Analysts had predicted an inventory build of 3.038 million barrels.

In the previous week, the API estimated a build in crude oil inventories of 8.731 million barrels. Meanwhile, the EIA’s estimates were for more muted, with the industry body reporting last week that the inventories had climbed by 7.9 million barrels.

WTI was trading up on Tuesday afternoon prior to the API’s data release as OPEC pushed up the timeline for its meeting to discuss the future of the group’s current oil production cut plans which are set to expire at the end of June. Indications are that Saudi Arabia hopes to extend the cuts in some form until the end of the year, while Russia is rumored to prefer an extension of a month or two at most,

Either way, the market likes the idea of more cuts, with the understanding that cutting production through June will be insufficient to draw down the global glut that is weighing on prices and taxing storage capacity,

Oil production in the United States has now fallen from 13.1 million bpd on March 13 to 11.4 million bpd for May 22, according to the Energy Information Administration—a drop of 1.7 million bpd—more than OPEC’s production cut agreement from last year.

At 4:16 pm EDT on Tuesday the WTI benchmark was trading up on the day by $1.42 (+4.01%) at $36.86. The price of a Brent barrel was trading up on Tuesday as well, by $1.31 (+3.42%), at $39.63.

The API reported a build of 1.706 million barrels of gasoline for week ending May 29—compared to last week’s 1.120-barrel build. This week’s draw compares to analyst expectations for a 1.0 million-barrel build for the week.

Distillate inventories were up by 5.917 million barrels for the week, compared to last week’s 6.907-million-barrel build, while Cushing inventories saw a draw of 2.2 million barrels.

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At 4:37 pm EDT, WTI was trading at $36.93 while Brent was trading at $39.66.

By Julianne Geiger for Oilprice.com

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