US crude oil inventories up, prices lower

A much larger rise than had been expected in US crude oil inventories last week and a decision by the Organization of Petroleum Exporting Countries to retain its current production ceiling caused oil prices to drop sharply on Wednesday.  At its meeting in Vienna, OPEC decided to retain its 28 million barrel per day production ceiling, saying that the predicted 1.6 million barrel per day growth in global oil demand can be met by non-OPEC production.

New data showed that US crude oil inventories grew by 6.8 million barrels last week.  This was well above the 1.6 million barrel growth that had been expected and took total stockpiles to 335.1 barrels, a 10 percent increase over the amount of crude in storage last year at the same time.  Part of the growth was accounted for by a slowdown in refining activity, which was at 84.1 percent last week, down from 87.7 percent the week before and 91 percent last year in the same week.  A generally warm winter in the United States has led to lower demand and a consequent decrease in refinery production.

While crude oil stockpiles were up significantly, gasoline and distillate inventories were down last week.  Unleaded gasoline stores fell by 1.1 million barrels, more than the 600,000-barrel decrease that had been forecast, and distillate supplies dropped by 2.7 million barrels during the week.  Even with that decline, distillate inventories were 13.7 percent above last year’s levels.

Brent crude April contracts lost $1.24 to $59.93 per barrel on the International Petroleum Exchange in London, while April delivery West Texas Intermediate crude on the New York Mercantile Exchange was down $1.53 to $60.05 per barrel.  Despite the declines in inventories, the price for Nymex unleaded gasoline dropped 1.74 cents to $1.616 per gallon, and heating oil declined by 3.97 cents to $1.6825 per gallon.