U.S. crude stockpiles grew last week by 2.2 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.649 million-barrel rise, as production hit a record high, the Energy Information Administration said. “It’s really about the inventory report today,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “The build in crude oil supply was a bit of a disappointment.” Crude production rose by 200,000 barrels per day (bpd) to a weekly record of 12.8 million bpd, the EIA said in its weekly report delayed a day by Monday’s U.S. Veterans Day holiday. “We might be over-producing a bit and leaving it sitting in the storage tanks,” said Ryan Kaup, a commodities broker at CHS Hedging.
The market earlier rose about 1% after OPEC pointed to a smaller surplus in the oil market next year although it still expects demand for its crude to drop as rivals pump more. OPEC Secretary General Mohammad Barkindo also said on Wednesday that there would likely be downward revisions of supply going into 2020, especially from U.S. shale. Barkindo said it was too early to say whether further output cuts would be needed.
The drop in demand could press the case for the exporter group and partners like Russia to maintain supply curbs at a meeting on Dec. 5-6. “The countdown to the meeting of the OPEC countries has started, and the question of whether the group and its allies will further cut supplies is top of mind,” said Norbert Rucker, head of economics at Swiss bank Julius Baer. “Current market conditions are testing the petro-nations patience and cohesion … Any major change in policy would come as a surprise.”
Prices were also capped by mixed signs for oil demand in China, the world’s biggest crude importer. Industrial output rose more slowly than expected in October, but oil refinery throughput hit the second-highest level on record.
