After going through 1 week's decline, the stockpiles of crude oil in the USA climbed once again. On the other hand, the fuel products inventories declined during the same period of time.
Overall, the crude inventories increased by 1.55 million, according to the data released by Energy Information Administration.
Just a week earlier, the crude inventories dropped by 1.694 million barrels after a build-up for 10 consecutive weeks. According to experts, the build in the crude inventories was to account for seasonal maintenance as well as any other disruptions that could stop the refineries from oil processing.
In addition, the less harsh winter season also meant the consumers would need less oil for heating the buildings. So that's also a factor that leads to less oil consumption and an eventual buildup of oil inventories.
The EIA data also revealed that the refineries in the USA are only operating at 88.2% capacity. Normally, the inventory runs during this time are usually close to 90% and even more.
Similarly, the production of gasoline also decreased and only averaged around 9.1 million barrels/day. The fuel output of distillate products averaged around 4.4 million barrels only.
With the winter officially ending pretty much everywhere, we believe that oil consumption could take a hit. For starters, there will be no need to heat the houses or other buildings.
Another factor that supports more buildup of US crude inventories is the cheap oil prices around the world. The recent banking crisis has raised liquidity fears among the market participants, which has led to a decrease in the WTI oil prices.
Similarly, the demand from China is also not as strong as the market was initially accounting for... So that's also negative news for the oil market as well.
In short, cheap oil means a chance for the US authorities to build up their reserves and then use it whenever deemed necessary.