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Oil prices rose today after the Energy Information Administration (EIA) released a report indicating a drawdown of 3.7 million barrels in crude oil inventory for the week ending March 31.
The EIA stated that inventories currently stand at 470 million barrels, which is approximately 4 percent higher than the five-year average for this time of the year.
Last week, there was a drawdown of 7.5 million barrels, which contributed to the increase in oil prices. However, the recent announcement by OPEC+ of a further reduction in oil production of 1 million barrels per day had an even greater impact on prices, driving Brent crude and West Texas Intermediate above $80 per barrel within hours.
Additionally, the EIA reported a decrease in gasoline and middle distillate inventories for the last week of March. Gasoline inventories fell by 4.1 million barrels, with daily production averaging 9.9 million barrels.
This compares to the previous week’s inventory draw of 2.9 million barrels and daily production of 10 million barrels. The EIA estimated a 3.6 million barrel decline in middle distillates inventory for the same period, with production at 4.7 million bpd. This is in contrast to the previous week’s distillate stock build of 300,000 barrels, with production averaging 4.6 million bpd.
After initially surging on Monday following the OPEC+ announcement, benchmarks stabilized, with Brent crude trading at slightly over $84 per barrel and West Texas Intermediate over $80 per barrel, slightly decreasing from earlier in the day.
Analysts attributed the stabilization to concerns about the future of oil demand. BOK Financial‘s Senior Vice President for Trading, Dennis Kissler, told that “We will need to see demand hold and grow to push crude into the upper $80s.”
Furthermore, recent economic data from China and the United States suggests a cooling of post-pandemic recovery, increasing concerns about the prospects for oil demand later this year.