A day after the American Petroleum Institute’s crude oil inventory report put a restraint on oil prices, the Energy Information Administration pushed prices up again by reporting a draw of 1.4 million barrels for the week to May 11.
This follows a combined inventory build of 8.4 million barrels in the prior two weeks. Analysts had expected a modest inventory build of 90,000 barrels.
The EIA said refineries processed 16.6 million barrels of crude daily, with gasoline production averaging 10.5 million barrels, compared with 9.9 million bpd a week earlier. Distillate production stood at 5.0 million barrels daily last week, unchanged on the week.
Gasoline inventories were down by 3.8 million barrels last week, after a total 2-million-barrel build in the prior 14 days. Distillate inventories decreased by 0.1 million barrels, after a combined 7.7-million-barrel draw over the prior two weeks.
This week’s API report seems to have served as a wake-up call for traders after lots of upbeat media reports about strong crude oil demand, helped by EIA’s latest drilling productivity report, which estimated that shale oil production in the Lower 48 would jump by a record 144,000 bpd this month, to 7.178 million bpd.
EIA’s latest weekly petroleum report will certainly fuel the bullish sentiment on the oil market even though some analysts are noting that financial demand for crude oil greatly exceeds physical demand, with spot oil prices at the deepest discount to futures in years.
Still, even more cautious analysts admit that the OPEC+ production cut deal has served its purpose and global oil supply is a lot tighter than it was just two years ago. This has supported a 70-percent price rise in Brent over the past 12 months, and the benchmark could rise further as OPEC keeps on the same course.
Meanwhile, U.S. and Canadian crude is trading at substantial discount due to pipeline capacity shortage that is making it difficult for crude from the Permian and Alberta to reach refineries.
By Irina Slav for Oilprice.com
