This week, the American Petroleum Institute (API) reported a surprise draw of 884,000 in United States crude inventories against expert predictions that domestic supplies would see a 3.3 million-barrel jump. This week’s drop marks the end of a long, six-week streak of crude oil inventory builds.
Zero Hedge’s forecast also predicted a 1.5-million-barrel decrease in gasoline inventories, but the API reported a smaller draw on gasoline inventories of 893,000.
Supplies at the Cushing, Oklahoma facility fell by 1.7 million barrels, while distillates saw a 4.229-million-barrel decline – the largest draw since October 2014.
West Texas Intermediate (WTI) prices jumped up slightly after the report’s release, though at the time of the report’s writing, a barrel traded at $53.90 – $0.43 lower than when markets opened on Wednesday morning.
“We’re expecting the API and EIA to report another supply build,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, told Zero Hedge by telephone prior to the report’s release. “The focus is returning to the reality that fundamentally we’re oversupplied.”
The Organization of Petroleum Exporting Countries (OPEC) and 11 other nations agreed to cut oil output in first six months of 2017 in order to rebalance international supply and demand, but its effect on oil prices have been somewhat lackluster given the higher inventories in the United States.
While compliance to the deal within OPEC has been high – around 90 percent – outsiders have only been able to make half of their committed cuts a reality.
“The big question is, will the Saudis cut even more to maintain the price,” James Williams, an economist at the Arkansas-based energy research firm WTRG Economics, told Zero Hedge.
All eyes will be on the EIA inventory report tomorrow at 10:30EST to see if this week’s crude oil inventory draw is confirmed.
By Zainab Calcuttawala for Oilprice.com
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