U.S. Energy Information Administration (EIA) on Wednesday reported a large build in U.S. crude oil inventories, but both major benchmarks of crude oil continued moving upwards as the market is still concerned with the loss of Iranian crude oil exports due to the upcoming sanctions.
The price of West Texas Intermediate (WTI) for November delivery settled 1.6 percent higher at 76.41 U.S. dollars, while Brent for December delivery price settled 1.8 percent higher at 86.29 dollars.
According to the Weekly Petroleum Status Report by EIA, U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve (SPR), increased by 7.98 million barrels during the week ending Sept. 28.
This has been the largest weekly increase of the U.S. commercial crude oil inventories so far this year. Lower crude oil input to refineries due to seasonal maintenance was a reason behind the crude oil build. However, analysts point out that there are some other major factors behind the large build. They believe that U.S. needs to maintain its exports above 2.5 million barrels per day as its crude oil output has been at record highs.
In the previous week ending Sept. 21, EIA reported a build of 1.85 million barrels in the U.S. crude oil inventories. Despite the significant build, the commercial crude oil inventories excluding SPR was still 13.1 percent below the levels of the same week last year.
U.S. crude oil refinery inputs averaged 16.59 million barrels per day last week, which was 77,000 barrels per day higher than the previous week's average. Over the past four weeks, refinery inputs averaged 17.09 million barrels per day, which was 11.3 percent higher than the same four-week period of last year.
The big increase in crude oil inputs to refineries from the same period of last year was due to the fact that Hurricane Harvey hit the Gulf coast a year ago and caused major disruptions in the refinery activities during that period.
U.S. total motor gasoline inventories decreased by 459,000 barrels last week, but still about 7.4 percent above the levels of the same week last year. Distillate fuel inventories decreased by 1.75 million barrels last week, 0.5 percent above the levels of the same week last year. Total commercial petroleum inventories increased by 8 million barrels last week.
According to the EIA, U.S. total products supplied over the last four-week period averaged 20.47 million barrels per day, up by 1.1 percent from the same period last year. Over the past four weeks, motor gasoline supplied averaged 9.32 million barrels per day, down by 1.5 percent from the same period last year.
Distillate fuel oil supplied over the last four-week period averaged 3.9 million barrels per day, down by 2.9 percent from the same period last year. Jet fuel supplied averaged 1.74 million barrels per day, up by 6.6 percent from the same period last year.
Meanwhile, the EIA reported that estimated weekly U.S. crude oil production remained unchanged at 11.1 million barrels per day during last week.
U.S. crude oil imports averaged 7.97 million barrels per day last week, 163,000 barrels per day higher than the levels of the previous week. Over the past four weeks, crude oil imports averaged 7.85 million barrels per day, 10.2 percent higher than the same four-week period last year.
U.S. crude oil exports averaged 1.72 million barrels per day last week, down by 917,000 barrels per day from the previous week. Significant decline in crude oil exports was a major reason behind the extensive build in the U.S. commercial crude oil inventories.
Oil prices moved downward on Wednesday right after official data showed a large build in U.S commercial crude oil inventories. However, both major oil benchmarks made a significant bounce back later in the day as the market is still concerned over a supply deficit caused by the upcoming sanctions on Iran.
On Wednesday, both WTI and Brent contract spot prices traded at a very wide range. WTI for November delivery contracts traded between 74.30 and 76.90 dollars. Meanwhile, Brent for December delivery contracts traded between 84.01 and 86.72 dollars within the day. Those wide ranges of the trading prices indicate the high volatility of the current oil prices.
The price differential between WTI and Brent settled at 9.88 dollars. The U.S. crude oil exports have been increasing in recent months. The current price differential encourages oil traders to take advantage of some arbitrage opportunities.
The U.S. crude oil exports had been forming an upward trend, increasing for four weeks in a row until the EIA released a huge decline in the exports. In the prior two weeks, U.S. crude oil exports averaged 2.5 million barrels per day.