Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
[Daniel J. Graeber, UPI]
Crude oil inventory levels in the United States increased last week even as some activity was stifled by Tropical Storm Cindy.
The American Petroleum Institute, an industry group, reported late Tuesday that U.S. crude oil inventories increased by about 850,000 barrels last week, a surprise build given the expectation of a draw of around 2.5 million barrels. Inventories of gasoline also moved against forecasts this week, showing a build of 1.4 million barrels.
Analysts had expected declines in inventory because of the impact on the U.S. Gulf Coast from Tropical Storm Cindy.
The price for Brent crude oil was relatively unchanged from the previous close at about 9:05 Eastern U.S. time to $46.72 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.14 percent to $44.18 per barrel.
Crude oil prices could move strongly in either direction after official inventory figures are released by the U.S. Energy Information Administration. Figures released by API and EIA have varied considerably in recent weeks, sparking questions about the validity of the data.
“When you have two groups providing potential market moving data and continue to report different numbers every week, it is obvious that one or both of the groups releasing the data is getting it wrong,” Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in a daily emailed newsletter.
Crude oil prices are relatively unchanged from this time last year even as the Organization of Petroleum Exporting Countries aims to correct the supply overhang with managed declines in production. Parties to the agreement will review the arrangement next month and industry analysts are suggesting deeper cuts may be necessary.
From Flynn’s perspective, the market may be acting to restrict operations in U.S. shale basins, which have been more resilient to lower oil prices than initially expected.
“A big drop in Permian oil production should be raising concerns,” he said. “Production in the shale sweet spot is down over 14 percent per well year-over-year and that is expected to fall to over 30 percent lower by the end of the year.”
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