Crude oil inventories fell 3.4 million barrels in the May 6 week to 540.0 million barrels, compared to an estimation from Wall Street of 400,000-barrel increase. The EIA released this information on Wednesday 10.30am, oil price goes up more than 3% and directly back to 46 dollar per barrel. For three weeks, this is the first time that the inventory goes down with a surprising outcome. While on the contrary, the oversupply of the oil market still and will be exist for a long time. Meanwhile, the Canada fire is fading and we will see another 1 million barrel production to add into the daily supply.
Crude stockpiles typically fall at this time of year as refineries complete seasonal maintenance and process more crude oil into refined products like gasoline.
The U.S. oil benchmark has surged 76% since hitting a 13-year low earlier in the year, buoyed by falling U.S. output and production outages in some parts of the world. But ample inventories have capped price gains, with some investors saying they don’t think the current rally can last before global stockpiles of crude oil decline.
Analysts expect to see a drop in imports in the coming week due to wildfires in Canada that prompted some companies to halt oil-sands production. “We should see pipeline flows drop in the coming two weeks,” said Matt Smith, director of commodity research at shipping tracker ClipperData.
In another boost to prices, the EIA estimated that U.S. crude production fell slightly last week to 8.8 million barrels a day, the lowest level since September 2014.
Shell Petroleum Development Co. of Nigeria shut off exports this week from a pipeline that carries about 150,000 barrels a day of oil due to a leak. This is in addition to another large pipeline in Nigeria that has already been shut. Nigeria produced about 1.7 million barrels a day of crude oil in March, according to the Organization of the Petroleum Exporting Countries.
Analysts say that these disruptions are likely to be short lived and the market remains oversupplied, underpinned by ballooning output by major producers such as Saudi Arabia and Iran, which are locked in a heated battle for market share.