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Rising U.S. stockpiles and an easing of supply concerns were two factors that drove U.S. West Texas Intermediate and international-benchmark Brent crude oil futures lower last week.
Continuing to underpin prices were the OPEC-led supply cuts and the U.S. sanctions against Venezuela and Iran, but another jump in U.S. production combined with speculation that Saudi Arabia and its allies would increase output to make up any shortfalls from the expanded sanctions against Iran and worries that Russia would end its participation in the plan to trim global supplies, outweighed any potentially bullish news.
Last week, June WTI crude oil settled at $61.94, down $1.36 or -2.15% and July Brent crude oil finished at $70.85, down $0.78 or -1.10%.
U.S. Energy Information Administration Weekly Inventories
On May 1, the Energy Information Administration reported that U.S. crude supplies rose by 9.9 million barrels for the week-ended April 26. That surpassed the rise of 1.4 million barrels expected by analysts. The EIA data also showed that gasoline inventories edged up by 900,000 barrels, while distillate stockpiles fell by 1.3 million barrels last week. Traders were looking for a draw of 1 million barrels for gasoline and 1.2 million barrels for distillates.
Total inventories now stand at 470.6 million barrels as imports grew to their highest since January and refining rates dropped below 90 percent of total capacity, the Energy Information Administration said.
Weekly U.S. oil production ticked up to a new high at 12.3 million barrels per day, according to the EIA. The weekly reading had been stuck between 12 million bpd and 12.2 million bpd since mid-February, with the U.S. output remaining constrained by pipeline bottlenecks in Texas.
The drop in refining activity and the rise in imports is being blamed for the surge in crude inventories. Analysts said the vast majority of the build was on the U.S. Gulf Coast – with refinery runs ticking lower and waterborne imports on the rise.
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There are reports that production from Saudi Arabia could edge higher in June to meet domestic demand for power generation, though output will remain within its quota in the supply pact, sources familiar with the kingdom’s policy said.
The world’s top crude exporter is expected to produce about 10 million bpd in May, slightly higher than in April but still below its 10.3 million bpd quota under the OPEC-led deal, industry sources said.
Prices were further pressured after Russia began pumping clean oil through the Druzhba pipeline towards western Europe again. Additionally, Poland Hungary and the Czech Republic are offering their domestic refiners about 8 million barrels of oil from strategic reserves to make up any shortfalls.