Crude Stores Rise Again
Crude prices remained buoyant this week despite the latest industry reporting showing a further build in US crude stores.
The Energy Information Administration’s latest report covering the week ending 4th October declared that US crude levels rose by 2.9 million barrels. This figure was well above analyst forecasts of a 1.4 million barrel increase. Crude stores at the Cushing delivery hub in Oklahoma rose by 914k barrels.
This latest increase in US crude stores means that the total inventory level is now sitting at 425.6 million barrels. This is the five-year average for this time of year. However, US crude production was up again last week, hitting fresh highs of 12.6 million barrels per day.
Looking further at the breakdown of the data, the report showed that refinery crude runs were down by 361k barrels per day across the week as refinery utilization rates dropped by 0.7%. The rise in inventory levels came despite a drop in net US crude imports which fell by 601k barrels per day over the week.
Gasoline Inventories Fall
However, the data was not all bearish. The report showed that US gasoline inventories were down by 1.2 million barrels.
This figure was far worse than the 257k barrel drop forecast by analysts. Distillate stockpiles, which include diesel and heating oil, were also down by 3.9 million barrels. This result, again, far outstripped expectations of a 257k barrel decrease.
The data also showed that the total number of products supplied over the last four-weeks averaged 20.9 million barrels per day, marking an increase of 3% from the same period last year.
EIA Projects Higher US Production
This latest data comes on the back of the EIA releasing its latest short term energy outlook on Tuesday.
In its latest release, the EIA now projects that US crude oil production will average 12.3 million barrels per day over 2019, marking an upward revision of 1.3 million barrels from the 2018 level.
The report also projects a further 0.9 million barrels per day increase over 2020. This would take production to an annual average of 13.2 million b/d
Disruptions Seen Fading
Despite the group’s new forecasts, the EIA reported that domestic production averaged 11.8 million barrels per day in July. This was down 0.3 million barrels per day in June. But, this was attributed to disruptions in the Gulf of Mexico due to Hurricane Barry.
However, with production in the region recovering and as new pipes in the Permian Basin come online, the EIA is forecasting increased production over the rest of the year.
Trade Talk Impact
Despite the report which is ultimately bearish for crude prices, oil is remaining bid.
Traders are looking positively at the next round of US-China trade talks due to start today.
Hopes of an interim deal are keeping downside offset for now. However, traders should be wary of the strong two-way risk here which could see crude crash lower again if talks break down.
Crude recently tested the 51.28 level support on the declines seen last week. This level is holding for now, keeping price within the range between 51.28 and resistance at the 60.09 level where price has mainly been contained over the last four months.
For now, the correction off the 51.28 level remains shallow and the preference is for a further break down lower. However, any positive headlines on the trade talks could fuel sudden upside.