A day after the American Petroleum Institute gave oil bulls a cold shower by reporting a 933,000-barrel build in crude oil inventories on top of a gasoline build, the Energy Information Administration deepened the gloom by reporting a 3-million-barrel build for the week to February 23.
Analysts had expected the EIA to report a 1.2-million-barrel build in crude oil inventories, so the actual figure is likely to be felt as a slap in the face for many.
Gasoline stockpiles were also up, by 2.5 million barrels. That compares with a 300,000-barrel build in the previous week. Production averaged 9.4 million bpd in the week to February 23, down from 10.1 million bpd a week earlier. Refineries operated at 87.8 percent of capacity, processing 15.9 million bpd of crude.
Prices continue to be supersensitive for any piece of new information. They fell after API reported the build on Tuesday, although the fall was capped by upbeat remarks from Saudi Arabia regarding oil production. The Kingdom’s energy minister said this was going to be lower in the first quarter than it was supposed to be under the production cut agreement.
Industrial data from Japan and China, however, weighed on oil benchmarks as they signaled there is a possibility that the string of economic outlooks forecasting stronger oil demand will never become reality.
At the time of writing, West Texas Intermediate traded at US$63.07 a barrel and Brent was at US$66.43.
China is a particularly big cause for worry. This week it reported the weakest industrial output growth data since mid-2016. Although last year China became the largest importer of crude oil, this year demand growth is expected to slow down as tougher pollution rules go into effect and as China continues its move away from heavy industry and towards services.
Added to this is the continual growth in U.S. shale oil production. Last week, this hit 10.27 million bpd and the EIA has projected that the U.S. will become the world’s largest producer, overtaking Russia, by 2019 at the latest if production continues to grow at this fast pace.
By Irina Slav for Oilprice.com