By Julianne Geiger of Oilprice.com
The American Petroleum Institute (API) reported a draw of 8.67 million barrels in United States crude oil inventories, compared to analyst expectations that markets would see a draw of only 2.8 million barrels for the week ending May 26.
The news of a larger than expected draw will no doubt be welcomed by the industry, as oil prices in the last couple of weeks have seemed particularly resistant to the efforts of OPEC to rebalance the oil market, and it appears equally as resistant to dwindling US oil inventories—the latter of which has been of significant concern throughout much of 2017.
While this week is a significant draw in itself, the last five reporting weeks has seen a reduction of 19.277 million barrels, according to API data. Using the last five weeks of EIA data—for weeks ending April 21 through May 19, crude oil inventories have diminished by 15.9 million barrels. While the draw doesn’t offset the builds seen in Q1, the disparity in trends from Q1 to Q2 cannot be ignored, and under normal circumstances, should be a positive sign for the industry. Instead, inventory reports and rig count data are having only a temporary knee-jerk effect on prices.
Gasoline inventories fell by a respectable 1.726 million barrels, according to the API. Oil prices have fallen sharply this week, from WTI at $51.41 last week to $48.24 today at 4:03 pm EST. This is even lower than two weeks ago when WTI was trading at $48.76. Brent was trading at $50.68 today at 4:04 pm EST—off from $54.11 this time last week and $51.78 the week before that. Gasoline prices were down 1.8% on the day at 4:05 pm EST at $1.59, down almost 7 cents on the week.
With OPEC out of obvious moves after its predictable and therefore anticlimactic announcement to extend production cuts into 2018, and with traders reluctant to get too excited over back-to-back inventory draws in the United States, Saudi Arabia late last week announced it would reduce oil exports by 15% to the US to manually adjust the inventory equation, in hopes of lifting prices.
Distillate inventories rose this week by 124,000 barrels, while inventories at the Cushing, Oklahoma, site fell by 753,000 barrels.
By 4:41 pm EST, both WTI and Brent Crude were trading up on the news at $48.66 and $51.08 respectively.
The U.S. Energy Information Administration report on oil inventories was due this week on Thursday at 10:30 a.m. EDT, due to the Memorial Day holiday in the United States.