The US Energy Information Administration (EIA) has published on Wednesday its weekly crude oil inventories ending March 17 that stockpiles recorded another surge around 5 million barrels to 533.1 million last week, higher than the forecast of 2.8 million.
EIA reported crude oil refinery at an average of 15.8 million barrels per day during the week that ended March 17, which was an increase of 329,000 barrels per day from the previous week’s average production rate. US refineries operated during the week were in a capacity of 87.4%. The production of gasoline also surged last week, reported an average production rate of 9.8 million barrels per day.
Meanwhile, commercial crude oil inventories saw another surge of 5 million barrels last week; marking the tenth time in 11 weeks that oil inventories in the US continue to report an increase. Gasoline and distillate fuel inventories both saw a decline by 2.8 million and 1.9 million barrels last week, respectively; however, despite the decline, both inventories still remained in the upper half of the average range.
The total products supplied came in at 19.5 million barrels per day, which was an increase of 0.5% compared to the same period last year.
Meanwhile, markets turn to the upcoming weekly rig output from Baker Hughes, an American industrial and oilfield services company, to be released on Friday. From last week’s report, Baker Hughes posted US’s oil rig count up from 14 to 631, which was the 9th consecutive weekly increase.
The continuous surge in the US oil stockpiles threatens the effectiveness of OPEC’s oil production cuts that began January this year.
West Texas Intermediate Crude oil in NYMEX was up 0.56% to $48.31 per barrel, and benchmark Brent crude climbed 0.49% to $50.89 a barrel early Thursday despite the continuous surge in US stockpiles. Although oil prices climbed in recent trading, the commodity has been down since its November rally.
In Asian markets, oil prices briefly held its Wednesday’s gains following the release of EIA data on US oil inventories as investors slightly disregarded the yet another higher supply data from the EIA, and are waiting for the actual data reception on the market for the supply surge.
For most of the month of March, oil prices have been in the oversold territory, as oversupply in the markets continues to prevent prices to climb, leading investors to grow more bearish whether OPEC could accomplish its target of the balanced oil market.
Oil prices previously plunged last March 8, from $52.79 to $50.20 per barrel when US oil inventories reported the 9th straight week of stock surge, leading oil prices decline in its three-month low.
Continuing Threat to OPEC
“The market remains nervous about rising US production, which is also reducing the effectiveness of output cuts by the OPEC and some non-OPEC countries,” said Abhishek Kumar, a senior energy analyst at Interfax Energy.
Despite the high January and February compliance rate by 90% and 94%, respectively; the Organization of Petroleum Exporting Countries is still having a hard time balancing the oil supply and prices in the market due to the unexpected rise in the US oil output in the recent weeks.
For the last half of 2016, the oil market has gone through extreme volatility as investors and analysts continue to monitor OPEC deal and agreement to cut oil production levels in order to decrease the supply in the commodities market as well as drive prices to surge to at least $55 - $60 per barrel.
Oil prices soared in November when OPEC announced an output deal with OPEC members and several non-members to cut production by 1.2 million bpd for members and 558,000 bpd for non-members. Upon the start of the output cut agreement, oil prices climbed as high as $55.24 per barrel.
OPEC is set to hold a meeting on May 25, where the organization will assess the status of the output deal and will decide whether to extend or end the agreement.
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