https://oilprice.com/Energy/Energy-General/Oil-Slides-On-Rising-Crude-Inventories.html#
Analysts had expected a draw of 460,000 bpd, after last week the EIA reported a draw of 400,000 bpd for the seven days to January 17.
At 431.7 million barrels, crude oil inventories in the United States are a little below the five-year average for this time of the year.
The EIA also reported a 1.2-million-barrel build in gasoline inventories as well, versus a build of 1.7 million barrels for the previous week. Gasoline production averaged 9.2 million bpd, down from 9.5 million bpd a week earlier.
Distillate fuel inventories fell by 1.3 million barrels last week. This compared with a 1.2-million-barrel decline a week earlier. Distillate fuel production averaged 5 million bpd in the week to January 24, unchanged from the previous week.
A day before the EIA reported inventory figures, the American Petroleum Institute once again took forecasters by surprise reporting a draw of 4.37 million barrels in U.S. oil inventories when analysts had expected a build of almost 500,000 bpd.
Oil prices rose on the API report but they were already on the mend Tuesday, after sources from OPEC said the cartel and its partners were considering an extension of the oil production cuts until June and that they might further deepen the cuts to compensate for the headwinds blowing from the direction of demand.
The coronavirus outbreak that started in China but has spread to more than a dozen other countries was the main culprit. With demand for air travel immediately hit and quarantines in China discouraging other forms of travel, too, the expected impact on oil demand could be significant. In fact, according to Barclays, it could shave off $2 off a barrel of oil.
By Nick Cunningham - Jan 26, 2020, 6:00 PM CST
The proximate driver is the coronavirus in China, which is raising concerns about a hit to the economy and slower oil demand growth. “One should be prepared for negative surprises when it comes to Chinese demand given that the government has now widened the coronavirus quarantine to ten cities in Hubei province with a total population of 30 million people,” Commerzbank said in a note. “The impact of this is all the greater because the restrictions are being imposed during the busiest travel season for the Chinese.”
The coronavirus could cut into demand by around 260,000 bpd and reduce oil prices by about $3 per barrel, according to a report from Goldman Sachs. However, in the days following the publication of that estimate, oil prices fell by even more than $3.
“The muted domestic demand, coupled with a marked rise in refinery capacities, is likely to cause Chinese exports of oil products to increase significantly further,” Commerzbank added. “Gasoline exports already grew by 27% year-on-year to 16.37 million tons in 2019, while diesel exports increased by 15% to 22 million tons.”
By Nick Cunningham - Jan 26, 2020, 6:00 PM CST
The proximate driver is the coronavirus in China, which is raising concerns about a hit to the economy and slower oil demand growth. “One should be prepared for negative surprises when it comes to Chinese demand given that the government has now widened the coronavirus quarantine to ten cities in Hubei province with a total population of 30 million people,” Commerzbank said in a note. “The impact of this is all the greater because the restrictions are being imposed during the busiest travel season for the Chinese.”
The coronavirus could cut into demand by around 260,000 bpd and reduce oil prices by about $3 per barrel, according to a report from Goldman Sachs. However, in the days following the publication of that estimate, oil prices fell by even more than $3.
“The muted domestic demand, coupled with a marked rise in refinery capacities, is likely to cause Chinese exports of oil products to increase significantly further,” Commerzbank added. “Gasoline exports already grew by 27% year-on-year to 16.37 million tons in 2019, while diesel exports increased by 15% to 22 million tons.”