By Barani Krishnan
Investing.com – US crude stocks rose nine times more than expected last week, adding a huge increase to a recent wave of construction, with a decline in refining activity, increased imports and record domestic production united to crush the traders.
rose 9.9 million barrels in the week to April 26 against forecasts of 1.5 million barrels, the U.S. Energy Information Administration said in its regular weekly report.
There were surprises on the side of gasoline and distillates from the data as well.
The EIA said it increased by 0.9 million barrels, compared to expectations of a 1 million barrels tie. fell 1.3 million barrels, compared with forecasts for a decline of 193,000 barrels.
US oil production, in turn, increased by 100,000 barrels to a record 12.3 million barrels per day.
Unsurprisingly, oil prices fell on the news. But the decline was modest considering the size of the rough construction, suggesting that traders seemed uncertain of where the market was approaching.
, the benchmark for US oil, has stabilized at 31 cents, or 0.5 percent, at $ 63.60 a barrel. , the global benchmark for oil, fell 11 cents, or 0.1 percent, to $ 72.17 at 2:45 pm ET (1845 GMT).
Just over a week ago, oil prices seemed to be aimed only at higher prices, with US sanctions on Iranian and Venezuelan oil and unplanned shutdowns in Libya and Angola, all coming together to exert maximum pressure on a market that rose 32% in the first quarter.
But since this week began, even as fighting broke out on the streets of Caracas between the forces of Venezuelan President Nicholas Maduro and his challenger Juan Guaido, oil could not recover. In trade on Tuesday, prices rose more than 0.5% on the day, ending April with a 6% increase.
Wednesday's crude construction, released by the EIA, is likely to halt the rally for now, traders said.
"It was a big surprise to have a production nine times higher than expected, along with a gasoline production where a draw was expected," said Tariq Zahir, an administrator at Tyche Capital Advisors in New York. "These numbers should continue to push oil prices in the short term."
John Kilduff, founding partner of the New York energy hedge fund, Again Capital, agreed.
"The small increase in gasoline stocks was also a pessimistic factor, as the increase came in the face of continued strong summer demand and a slight decline in refinery utilization rates," Kilduff said.
The EIA said the refineries operated at 89.2% of its operating capacity last week, up from 90.1% last week. Refiners have been slowing activity due to the maintenance or reduction of profit margins lately in crude oil processing.
"A drop in refining activity and an increase in imports helped propel crude oil inventories to another major construction," said Matt Smith, of New York-based raw cargo company Clipperdata.
"The vast majority of the construction was on the US Gulf Coast, with aquatic imports increasing," Smith said, noting that oil stocks have risen nearly 30 million barrels in the last five weeks with a 500,000 barrels of government release. Strategic Petroleum Reserve adding to the blend.