Falling Oil Prices Accelerates on Building up Crude Oil Inventories

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As the oil industry continues to face oil price shocks, the U.S. Energy Information Administration has announced an increase in crude oil inventories of 1.6 million barrels for the week ending March 20.

This comes after two consecutive weekly increases in inventory, the first of 7.7 million barrels for the first week in March, and another of 2 million barrels for the second week of the month.

The stocks of gasoline and distillates, however, have dropped considerably since the beginning of the month. For the first week of March, gasoline inventories fell 5 million barrels, while in the second week of the month, they lost an additional 6.2 million barrels. The most recent data from last week suggests that gasoline stocks fell 1.5 million barrels.

Last week, distilled fuel inventories lost 700,000 million barrels after declining 9.3 million barrels in the previous two weeks.

Gasoline production averaged 9 million bpd last week, up from 10 million bpd the previous week. Production of distilled fuels averaged 4.8 million bpd last week, compared to 4.7 million bpd the previous week. In total, refineries processed an average of 15.8 million b / d, compared to 15.8 million b / d the previous week.

Meanwhile, the price of oil got a brief respite earlier this week, with West Texas Intermediate adding more than 2% on Monday in hopes that US law would approve an economic stimulus package. The package is worth $ 2 trillion and aims to mitigate the worst effects of the Covid-19 pandemic on the US economy.

Another thing that has helped oil prices is the weaker dollar; the US currency fell after the Federal Reserve made not one but two emergency rate cuts this month and yesterday announced new measures to support the economy. As a result, oil, which is traded internationally in dollars, has become a little more attractive to buyers.

“Oil is climbing higher, mainly due to the weak dollar due to unprecedented Fed action,” Edward Moya, senior market analyst at OANDA, told Reuters. Unfortunately, “the volatility of WTI crude oil will remain high and traders should not be surprised if this rally eventually wears off.”

At the time of writing, WTI was trading at $ 23.03, down from yesterday’s close, and Brent crude was trading at $ 28.75, also down from Tuesday closing.

By Irina Slav for Oilprice.com

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