Crude oil prices hesitated today after the Energy Information Administration reported a US oil inventory build of 7.5 million barrels for the first week of February.
The report came a day after the American Petroleum Institute estimated an inventory build of 6 million barrels. Analysts had expected a build of 2.93 million barrels for the period, after the EIA reported an inventory increase of 3.4 million barrels for the prior week.
Refineries processed 16 million bpd last week, the EIA said, and produced 9.2 million bpd of gasoline and 4.8 million bpd of distillate fuel. This compares with a processing rate of 16 million bpd a week earlier, gasoline production of 9.9 million bpd, and distillate fuel production of 5 million bpd.
Gasoline inventories last week shed a modest 100,000 barrels, after a draw of the same size for the previous week.
Distillate inventories fell by 2 million barrels in the week to February 7, after a 1.5-million-barrel decline reported a week earlier.
Oil began regaining ground earlier today after reports from China suggested the coronavirus outbreak may have peaked, with new case reporting slowing down. Medical experts, however, have warned against harboring great hopes that the spread of the disease has peaked, saying the virus can yet surprise forecasters.
Even so, investor sentiment seems to be improving and this is being reflected in oil prices. At the time of writing Brent crude was trading at $56.09 a barrel, up by almost 4% from yesterday’s close before the release of EIA’s report, and West Texas Intermediate was trading at $51.62 a barrel, up by over 3 percent.
Yet before we call it a true oil price rally it would have to continue for more than a day and there are factors that could end said rally before it properly begins. Any news about a resolution of the conflict that caused the Libya production outage, for example, will pressure prices significantly and such news might come as soon as next week, after another round of talks this week in Geneva.