Crude oil prices fell further after the Energy Information Administration reported a crude oil inventory build of 1.2 million barrels for the first week of the new year. The build follows a hefty 11.5-million-barrel draw reported by the EIA for the previous week. For this week, analyst had expected a draw of 4.064 million barrels for the week to January 3.

Oil prices were already on the decline when the EIA reported the inventory figures, after Iran attacked two military bases in Iraq that housed U.S. troops but later reports showed the damage was limited. In this context, with U.S.-Iran tension spiking, chances are the EIA’s inventory report will this week have a rather muted effect on prices.

The authority also reported a 9.1-million-barrel inventory increase in gasoline stockpiles, with production of the fuel averaging 8.9 million bpd during the reporting period. This compares with an inventory rise of 3.2 million barrels for the previous week and average production of 10.2 million bpd. In distillate fuels, the EIA reported an inventory build of 5.3 million barrels, with production averaging 5.3 million bpd. This compares with a build of 8.8 million barrels in distillate fuel inventories and average daily production of 5.3 million bpd a week earlier. Refineries processed 16.9 million bpd of crude oil last week, compared with 17.3 million bpd a week earlier. Imports averaged 6.7 million bpd, up from 6.4 million bpd a week earlier. Crude oil production, which in the last two weeks of 2019 averaged 12.9 million bpd—a record high—may have remained flat during the first week of January, too, as shale drillers began adopting a more cautious stance on production growth in the face of range-bound prices.

Now that prices are indicating they may break out of their range if the hostilities in the Middle East escalate further, shale drillers are rushing to hedge their 2020 and 2021 oil output at the higher prices.