Amid rising oil prices thanks to the three-week suspension of the Forties pipeline and a major inventory draw estimated by API, the Energy Information Administration injected some more optimism in markets with a reported draw of 5.1 million barrels of crude.
The authority said that at 443 million barrels, inventories of crude oil were in the middle of the seasonal average. Refineries processed 17 million barrels of crude daily last week, the EIA also said, producing 10.1 million barrels of gasoline, up from 9.8 million bpd last week.
Gasoline inventories, which last week pushed prices down after API estimated a massive build—that EIA largely confirmed—this week will probably have the same effect: according to EIA, they rose again, by 5.7 million barrels
In addition to the inventory draw, WTI is at the moment benefiting from greater demand for U.S. oil from Asia, following the shutdown of the Forties oil pipeline network in the North Sea, which has taken off more than 400,000 bpd of crude from the market.
The shutdown—following the discovery of cracks in parts of the infrastructure—caused Brent crude to temporarily jump above US$65 a barrel and after that continued to trade closer to that than to US$60.
This development will naturally increase the appeal of alternatives to Brent-linked oil grades, including U.S. and Russian crude as the spread between the benchmarks widens. The ICE Brent/WTI spread on Monday, for example, after the announcement of the Forties shutdown, widened to over US$6.60 a barrel from less than US$5 last week.
Meanwhile, the OPEC camp is quietly discussing its exit strategy from the production cut agreement, likely spurred by Russia’s insistence to have one in place soon, so it can leave the deal at the first opportunity.
The strategy will be announced at the June meeting of the Vienna Club. Until then, it will be among the most important factors to watch out for in the oil market.