By Hannah Levitt
U.S. crude oil inventories increased by 9.5 million barrels, bringing total inventories to a record high of 518.1 million barrels for the week ended February 10 according to the U.S. Energy Information Administration.
This was the sixth consecutive week of increases. It came in contrast to the expected increase of 3.5 million barrels according to analysts surveyed by Bloomberg.
Despite an unexpected rise in inventories, WTI crude oil prices closed Wednesday at $53.06 per barrel, just 0.3 percent lower than Tuesday’s closing price of $53.20.
The PRICE Futures Group Senior Analyst Phil Flynn explained that prices ultimately did not move very much today due to big picture indications of a much tighter oil market in the coming months.
“Even though we saw a much bigger than expected increase in oil inventories, if you look beyond the numbers there are signs that these big increases are going to be coming to an end pretty soon,” Flynn said.
According to Flynn, these signs include decreased supply due to the Organization of Petroleum Exporting Countries production cuts.
“If you look around the globe, inventories are already falling and the price of oil, for example in Europe, is at the highest level it’s been versus the U.S. in a couple of years,” Flynn said. “The reason why that is is because they’re the first ones that are feeling the brunt of OPEC production cuts, and so because they’re closer to OPEC oil they’re already seeing their inventories go down.”
Flynn expects the U.S. to feel an increased effect from the OPEC cuts in the coming weeks. Additionally, oil refinery demand at this time of year is relatively weak due to maintenance, but around Easter demand will begin ramping back up, driving down supplies, Flynn said.
“Basically what we are seeing is global demand rising over time, global production is going to fall, and that’s going to tighten supplies which should drive up prices next year,” Flynn said.
GasBuddy Director of Public Relations Allison Mac also pointed to refinery maintenance to explain why gas prices are still predicted to jump in 2017, despite a 2.8 million barrel increase total motor gasoline inventories last week according to the EIA.
“Average gasoline prices will rise 35-75 cents between recent lows and peak prices, just in time for spring break travel plans,” Mac said in a GasBuddy blog post.
The average price of gas in Chicago is currently $2.43 per gallon according to GasBuddy, but is expected to climb to $3 per gallon this spring, Mac said.