Oil prices soured after Tuesday’s comments from Saudi Arabia’s oil minister Ali al-Naimi, who essentially ruled out the possibility of an OPEC production cut.
The oil markets received another round of bearish news on Wednesday when the EIA released its latest weekly figures from the oil patch. The data showed that refinery runs declined again, down to 15.7 million barrels per day for the week ending on February 19. That is a drop of 163,000 barrels per day compared to the week before.
More ominously was the continued rise in crude oil inventories. Oil stocks jumped by another 3.5 million barrels, leaving the U.S. with 507.6 million barrels of oil sitting in storage, yet another record. The key storage hub of Cushing, OK, saw another slight increase in inventory levels, now topping 65 million barrels. The hub is now about 90 percent full. Related: Electric Car War Sends Lithium Prices Sky High
There were small pieces of good news, however. Gasoline inventories did post a decline, dropping by 2.2 million barrels. Storage levels for gasoline are still at abnormally high levels, but the drawdown is a small sign that consumers are responding to cheap gas.
U.S. oil production continued to inch downwards. For the week ending on February 19, total oil production fell by another 33,000 barrels per day to 9.1 million barrels per day. Although production figures always fluctuate from week-to-week, production has remained largely flat since September. The U.S. has now posted six consecutive weeks of declines, albeit in very small increments. The figures add further evidence to the notion that the U.S. will see sizable reductions in oil production this year, mostly from U.S. shale. The IEA on Monday said that the U.S. will lose 600,000 barrels per day of production in 2016.
By Charles Kennedy of Oilprice.com
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