Global crude oil prices declined slightly after a report by the American Petroleum Institute (API), on Tuesday, estimated a large crude oil inventory build of 8.731 million barrels for the week ended May 22, 2020. The situation is raising fresh concerns about excess supply.
The oil price decline was also extended due to uncertainty over Russia’s commitment to deep oil production cuts in the lead up to an OPEC+ meeting on June 9, 2020.
The American WTI fell by over 2% to end up at $32.09 per barrel as at 3 am on Thursday. Similarly, Brent crude further declined by 1.24% to sell at $34.31 per barrel, while the Bonny light crude was down by 2.32% to sell at $33.28 per barrel.
Analysts had predicted an inventory draw of 2.50 million barrels. In the previous week, the API had estimated a draw in crude oil inventories of 4.8 million barrels. Meanwhile, estimates by the US Energy Information Administration (EIA) were different, with the industry body reporting last week that the inventories had declined by 5 million barrels.
The oil prices were already on a decline before the API’s data release, although the outlook for a rebalanced oil market is more positive than it was just two weeks ago. This is because many U.S states and some major economies around the world are easing lockdown restrictions, even as the world’s largest oil producers like Saudi Arabia, Russia, and the United States are implementing more output cuts than market analysts had predicted.
Oil production in the USA has now declined from 13.1 million barrels per day on March 13 to 11.5 million barrels per day on May 15, according to the EIA, marking a drop of 1.6 million barrels per day. Note that this is more than OPEC’s production cut agreement from last year.
Note that the API had also reported an increase of 1.120 million barrels of gasoline for the week ending May 22 as against last week’s 651,000-barrel draw. This is more than 10 times the build that analysts had predicted.
The report also stated that distillate inventories were up by 6.9 million barrels for the week, as against last week’s 5.1 million barrel inventories. This is as Cushing inventories fell by 3.37 million barrels.