Oil Prices Rebound After EIA Reports Build In Crude Inventories
The Energy Information Administration reported a 2.4-million-barrel build in crude oil inventories for last week. The report’s out a day after the S&P 500 futures dropped 1 percent on the news that President Trump’s advisor Gary Cohn had handed in his resignation – a move seen widely as fueling further worry about a possible global trade war if the United States approves Trump’s proposal for a 25-percent import tariff on steel and a 10-percent levy on aluminum.
Weakened by the resignation news, oil prices slid further after the American Petroleum Institute estimated inventories had risen by 5.66 million barrels last week in yet another weekly reminder about the excessive volatility reigning on oil markets.
The EIA had some good news, however. The authority reported that gasoline inventories had declined by 800,000 barrels in the reporting period. That compares with a 2.5-million-barrel build in the previous week. Since the start of the year, there has been only one week featuring a decline in gasoline stockpiles, while the total build since then stood at 17.8 million barrels.
Refineries processed 15.9 million barrels of crude per day last week, producing 9.9 million barrels of gasoline daily. Production likely continued to increase last week, just as the International Energy Agency said that the U.S., Canada, Brazil, and Norway can together cover the growth in global oil demand over the next five years. Should this forecast come to pass, OPEC would be hard pressed to continue pumping less oil than before and even that won’t guarantee oil prices remaining at comfortable levels for the cartel’s members.
Meanwhile, a heavyweight from the shale oil and gas industry has warned against too much optimism about the future of U.S. oil. EOG Resources’ former boss, Mark Papa, said that the sweetest spots in the Permian and in the wider West Texas patch have already been tapped. What’s more, Papa said, drillers in the shale plays are struggling with shortages of frac sand as they need more and more of it to make wells more productive. Also, Papa said, there are shareholders breathing down drillers’ necks demanding higher returns.
WTI was trading at US$61.88 a barrel at the time of writing, and Brent crude was at US$65.13 a barrel.