Crude oil prices fell today after the Energy Information Administration reported what can only be described as a colossal increase in crude oil stock by 21.6 million barrels in the week through February 26.
This was in sharp contrast to the estimated construction of 7.356 million barrels reported by the American Petroleum Institute and analysts’ expectations of an inventory draw of 1.85 million barrels. In the previous week, the EIA estimated an increase in the crude oil stock of 1.3 million barrels.
The market yesterday rejected the API’s estimate of an increase in oil stocks thanks to a huge drop in gasoline inventories, by 9.93 million barrels, and a similar size decline in stocks of middle distillates. Both draws resulted from refinery disruptions caused by the Texas Freeze that hit the state in February, damaging its oil and gas production and refining operations.
The EIA reported a 13.6 million barrel drop in gasoline inventories in the last week of February, and an average production rate of 8.3 million barrels / day. In comparison with gasoline inventories practically unchanged – at 257.1 million barrels – for the third week of the month and a production rate of 7.7 million barrels / day.
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For medium distillates, the EIA reported a stock drop of 9.7 million barrels in the last week of February, against a drop of 5 million barrels in the previous week. Distillate production averaged 2.9 million bpd last week, compared with 3.6 million bpd the week before.
Oil prices have been extra-volatile this week ahead of the OPEC + meeting tomorrow, as internal divisions persist and deepen, and traders suspect that voices of production increases may gain an advantage.
India added fuel to the debate, asking OPEC + to abandon “artificial” cuts in production and let prices fall.
“Artificial cuts to keep the price going up are not something we support,” a Ministry of Petroleum and Natural Gas told the media earlier this week.
However, oil producers in the Middle East desperately need higher oil prices to reduce widening deficits and return to growth. Even so, they may have to consent to some form of increased production and turn the fight over prices into a fight over market share.
By Irina Slav for Oilprice.com
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