Oil Moves Down on Inventory Rise

On March 29, 2024, 5:49 AM

Crude oil prices were in the red today after the Energy Information Administration reported an inventory build of 3.2 million barrels for the week to March 22.

This compared with a draw of 2 million barrels for the previous week, when the EIA also estimated a sizeable draw in gasoline inventories, which helped support prices.

This week, the API inventory report that came out on Tuesday pushed prices lower as it estimated an inventory build in crude oil of over 9.3 million barrels for the week to March 22.

For the week to March 22, the EIA reported more mixed changes in fuels.

Gasoline stocks added 1.3 million barrels over the reporting period, with production averaging 9.2 million bpd. This compared with a draw of 3.3 million barrels for the previous week, when production stood at a daily average of 9.6 million barrels.

In middle distillates, the authority estimated an inventory decline of 1.2 million barrels for the week to March 22, with production averaging 4.8 million barrels daily.

This compared with a modest inventory build of 600,000 barrels for the previous week, when production averaged 4.7 million barrels daily.

Oil prices that fell on Tuesday, meanwhile, continued depressed on Wednesday despite expectations that OPEC+ will leave its production policy untouched at it next meeting in early April.

“A sharp rise in U.S. crude inventories and expectations for a potential inaction by OPEC+ in its output policy next week saw further unwinding in oil prices in today’s session, as profit-taking accelerates following a strong rally in mid-March,” IG analyst Jun Rong Yeap told Reuters.

“We should see a slightly tighter market in the second quarter, given OPEC+’s voluntary cuts are being extended,” Sean Lim, analyst with Malaysian RHB Investment Bank, told Bloomberg. He noted, however, that prices were getting less sensitive to news from OPEC+.

What they are getting more sensitive to, on the other hand, is suggestions of tighter supply on the horizon, including as a result of OPEC+ action. In the early months of the cuts most traders assumed there was plenty of supply around to offset them but now analysts are starting to predict a deficit, including the International Energy Agency.