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Bearish EIA Inventory Report Sends Oil Prices Lower

Crude oil prices fell further today after the Energy Information Administration reported a crude oil inventory build of 4.4 million barrels for the week to January 15.

This compared with an inventory decline of 3.2 million barrels estimated by the EIA for the previous week.

In gasoline, the EIA reported an inventory fall of 300,000 barrels for the week to January 15, which compared with a 4.4-million-barrel build for the previous week.

Gasoline production averaged 8.9 million bpd last week, which compared with 7.5 million bpd in the first week of January.

In middle distillates, the EIA reported an inventory increase of 500,000 barrels for last week, compared with a 4.8-million-barrel build for the previous week.

Middle distillates production averaged 4.5 million bpd in the week to January 15. This compared with 4.7 million bpd a week earlier.

U.S. refineries processed 14.8 million bpd last week, which compared with 14.7 million bpd a week earlier. Facilities operated at an average 82 percent of their capacity.

Oil prices have been extra volatile this week as expectations of a fatter U.S. stimulus plan from the Biden administration clashed with concerns about the continuing pandemic and extended or renewed lockdowns.

News that Iran was ramping up its oil production in anticipation of the U.S. lifting sanctions, at the same time, made for a strong downward pressure on benchmarks, with both Brent crude and WTI down by more than 1 percent at the time of writing. Reports of new lockdowns in China added to the pressure.

Related: Can Shale Resist The Lure Of Another Output Surge?

The International Energy Agency earlier this week added fuel to the concerns, revising down its oil demand outlook for this year by 300,000 bpd. The authority said it expected demand to average 96.6 million bpd in 2021, after crashing by an all-time high of 8.8 million bpd in 2020 under the weight of the Covid-19 pandemic.

The agency was upbeat about the second half of the year, however, noting that mass vaccination should spur economic recovery, which will in turn boost oil prices. Nothing is certain, however, as the WHO has meanwhile warned that vaccinations are not a silver bullet solution to the pandemic problem with is chief suggesting social distancing measures will likely stay in place despite vaccinations.

By Irina Slav for Oilprice.com

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