Crude Oil Slides Lower on Bad EIA Report

 

Crude oil is getting hammered after the latest inventory data from the Department of Energy showed a larger than expected build in crude oil stocks. West Texas Intermediate crude oil is lower by 3.7% almost at $44.60 per barrel, and is trading at its lowest level since August 15. The Energy Information Administration (EIA) yesterday released its weekly inventory figures which showed a larger than expected rise in its inventories. US crude oil stockpiles climbed 2.3 million barrels higher through the week ending on August 26^th.  According to a survey conducted by Thomson Reuters, Analysts had earlier anticipated smaller build figures of around 921 thousand barrels.

The US stockpile rose to almost 526 million barrels, the highest since the week that ended in June 24^th. The American Petroleum Institute on Tuesday reported a build of 940 thousand barrels. US crude oil imports were reportedly averaging over 8.9 million barrels per day through last week, 275,000 barrels higher than the previous week’s daily average. There was however a slump in crude oil refinery inputs as they fell by an average of 64,000 barrels per day from the previous week, leaving the average inputs figure at 16.6 million barrels per day.

The weakness in crude prices today have come despite statements made by Saudi Arabia that they will not flood the market with oil ahead of the informal OPEC meeting to be held on September 26^th to September 28 in Algeria. The group met in April to discuss a production freeze but the talks fell apart. The remarks made by Saudi Arabia comes amidst them pumping out crude oil at a record high pace.

"The kingdom's production meets the requirements of the customers... the kingdom's production policy will maintain a large degree of responsibility," Saudi Arabian energy minister Khalid al-Falih told Saudi-owned al-Arabiya television on Wednesday.

Many market participants have grown weary of empty promises and have become more sceptical on whether this round of talks will result in an agreement, prices also fell on Tuesday when uncertainty over the outcome of the next OPEC meeting was increased. Iran has repeatedly refused to comply with OPEC’s directive for a collective production freeze stating that it would continue to pump until its output is on par with that before sanctions.

Iran is largely expected by analysts to maintain its stance when the 14-member OPEC bloc meets in Algeria next month. A Bloomberg report said “Iran plans to boost its output by 200,000 barrels a day by the end of the year. In July, Iran’s daily output was at 3.6 million”.

“It increasingly looks like the September meeting could end up being a dud, much like the April meeting was a dud,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. “That’s really the big reason why we’re pulling back.”

The recent strength of the dollar has also affected the prices of crude prices in recent weeks as investors continuously assess the outlook for a US interest rate increase this year.