Disappointingly for bulls, crude oil prices were softer this week as the latest industry data showed yet another build in inventories.
The latest Energy Information Administration report indicated that U.S. crude stockpiles rose 1.3 million barrels in the week ending February 1st. This was less than half of the 3.7 million barrel build for which the market was looking.
Sitting at just over 447 million barrels, U.S. crude stockpiles are now around 6% higher than the five-year average for this time of year. The report comes just a day after the American Petroleum Institute issued its weekly report noting a 2.5 million barrel build in crude inventories.
Gasoline Inventories UP
The data in the report also showed that gasoline inventories rose by 500k barrels over the week, now sitting around 5% above the average for this time of year.
However, distillate inventories (which include diesel and heating oil) were down by over 2 million barrels over the week, now sitting just 4% above the average for this time of year.
Gasoline Production Lower
Propane-propylene inventories also saw a decrease of 2.6 million barrels over the week bringing them down to 4% above the average for this time of year. Gasoline production was also seen lower, averaging 9.9 million barrels per day while distillate fuel production jumped, averaging 5.1 million barrels per day.
US crude imports were seen higher again, following a large drop over the prior week, rising by 63k barrels per day to stand at 7.1 million barrels per day over the week. On average, over the last four weeks, U.S. crude oil imports have averaged 7.5 million barrels per day.
Crude Inventories Rise Frustrating For OPEC
The price action in crude this week will be bitterly disappointing for OPEC which is attempting to turn the tide through a six-month period of production cuts.
Along with a group of allied nations led by Russia, OPEC has begun reducing supply which will take around 1.2 million barrels per day off the market, with around 800k barrels per day of production cuts coming from the oil cartel itself.
U.S. Crude Production Remains At Highs
With U.S. crude production levels still holding around record highs, the positive impact from a reduction in OPEC output is being absorbed by the market and prices are remaining weighted.
However, the market remains hopeful that the cumulative effect of the OPEC production cuts along with fresh U.S. sanctions on Venezuela which have seen the sales of around 500k barrels of crude frozen, will start to sway prices to the topside again.
Technical Perspective
The labored recovery in crude continues with price currently stagnating around the 54.47 level resistance. If price can sustain above this level, focus will shift back to a test of the next key structural level at the 5.03 region.
Above here we have a lot of prior swing lows, made on the run-up to last year’s highs, offering structural resistance. To the downside, any retracement into the 50.30 region should find support, keeping focus on a further recovery higher.