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Oil Falls On Soaring U.S. Crude Inventories

Crude oil traded lower today after the Energy Information Administration reported a substantial build in crude oil inventories, at 9.9 million barrels for the last week of April.

The report followed a surprising build estimate from the American Petroleum Institute, of 6.8 million barrels, which pushed prices lower yesterday.

The EIA inventory build follows an increase of 5.5 million barrels for the third week of April. Last week, the EIA report helped prevent a spike in prices after the U.S. State Department announced it would not be renewing Iran sanction waivers for importers of Iranian oil after they expire today.

Since then, prices have continued relatively stable, especially after Saudi Arabia said on more than one occasion that it was ready and willing to step in and replace the lost Iranian barrels. However, this week has seen an escalation in Venezuela that may serve as a booster to prices even though there seems to be more talk about a power takeover by Guaido than actual action for the time being.

In the meantime, the EIA also reported gasoline inventories last week had risen by 900,000 barrels, with average daily production ahead of refinery maintenance season rising on the week to 9.9 million bpd from 9.8 million bpd a week earlier.

Distillate fuel inventories shed 1.3 million barrels last week, compared with a decline of 700,000 barrels a week earlier. Production of distillate fuels averaged 5.1 million bpd, flat on the average daily production rate in the previous week.

Processing rates at U.S. refineries averaged 16.4 million bpd last week versus 16.6 million bpd a week earlier.

Over the next few days prices are likely to remain stable unless the situation in Venezuela escalates further even though its steadily falling production and the blackouts that caused upgrader outages last month should have made traders be ready for anything when it comes to Venezuela. The effect of the Iran sanction waiver remover will likely continue to be muted, especially since it’s likely that Iran will find a way to continue exporting its crude despite the end of waivers.

By Irina Slav for Oilprice.com

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