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Oil Jumps as Talk of OPEC Rollover Overshadows Humongous U.S. Crude Build

CommoditiesMar 03, 2021 04:46PM ET
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© Reuters.

By Liz Moyer

Investing.com -- Oil prices jumped on Wednesday as talk that the OPEC+ global alliance of producers might withhold an output hike for April overshadowed a U.S. government report showing a humongous build in crude stocks for last week.

Expectations have been rife over the past week that OPEC+, a 23-member coalition which bands the original 13 members of the Saudi-led Organization of the Petroleum Exporting Countries with 10 non-members steered by Russia, will raise output by 500,000 barrels per day at least  from next month.

Reuters, however, reported on Wednesday, quoting three OPEC+ sources, that the alliance was considering rolling over existing production cuts in April, instead of raising output as oil demand recovery remained fragile due to the Covid-19.

The speculation over the OPEC+ action overshadowed the weekly Energy Information Administration report showing a hike of more than 21.5 million barrels in U.S. stocks, versus analysts' expectations for a draw of 928,000 barrels.

New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled up $1.53, or 2.6%, at $61.28 per barrel. 

London-traded Brent, the global benchmark for oil, rose $1.37, or 2.2%, to settle at $64.07.

Stockpiles of U.S. crude ballooned last week after a snowstorm shut down refineries in the heart of America’s energy heartland Texas, causing an inventory pileup even bigger than that seen at the height of last year’s demand destruction from the coronavirus.

The EIA said U.S. crude inventories swelled by 21,563,000 barrels for the week ended Feb. 26.

That was larger than the 19.2 million-barrel build seen during the week to April 10, 2020, when demand for oil cratered amid stiff economic lockdowns prompted by the COVID-19 outbreak.

“It looks like the Texas shutdown was more of an Armageddon for crude stockpiles than a seismic shift," said Investing.com analyst Barani Krishnan.

EIA data showed the build in crude stocks came as refinery runs fell 2.3 million barrels and the refinery utilization rate fell 12.6% from 68.6% to 56%.

Refinery rates have plummeted since the February 13-17 snowstorm that hit Texas, the biggest US state for oil and gas production, as well as refining.

“All indications are that this 56 percent is a record low for refinery runs in a week,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. The typical US refinery run rate at this time of the year would be around 85 to 95 percent, he said.

EIA data also showed crude imports rose 1.7 million barrels per day last week to reach 6.3 million bpd. Production gained as well by 300,000 bpd to 10 million bpd, adding to supplies, while crude exports were barely changed at 2.35 million bpd.

The build in crude stockpiles aside, declines were staggering as well in inventories of gasoline and stockpiles of distillates, which include heating oil.

Gasoline inventories fell by 13.6 million barrels versus the industry consensus for a draw of 2.3 million.

Distillate stockpiles fell by 9.7 million against average forecasts for a drop of 3.0 million, as frigid temperatures across the United States sparked extraordinary heating demand.

The snowstorms that descended the United States in recent weeks came after an unseasonably warm start to the 2020/21 winter. The hit on Texas, particularly, was so bad and unexpected that oil and gas couldn’t flow like normal in key production basins.

Typically known for its sweltering weather most of the year, Texas initially looked like a white blanket after the blitz in the state known for maintaining temperatures of between 60°F (15.6°C) and 70°F (21.1°C).  

More than four million homes in Texas did not have power right after the storm as the state’s electricity grid got knocked out, and many did not have water supply for more than a week after the state’s worst snowstorm in 30 years.

Oil Jumps as Talk of OPEC Rollover Overshadows Humongous U.S. Crude Build
 

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Comments (18)
vijay misra
vijay misra Mar 03, 2021 5:38PM ET
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Opec+ now know how to control the price, they got the taste and are united. Demand will be governed by many factors but by controlling the production they can maintain the price and thus make same or more money. If demand rise prices will go even further and production will rise only when there will be a threat from renewables to bring down the prices. Oil is going to $100 by summer, Buy now before train leaves the station! Combine this with NASDAQ route, money has to flow into commodity...
katya litski
katya litski Mar 03, 2021 2:14PM ET
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wheres my check
Alan Rice
Alan Rice Mar 03, 2021 1:29PM ET
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A beginning of rational thought ??
Me comment
Me comment Mar 03, 2021 12:59PM ET
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If the price stays high crude will continue to flow even if demand is slow.
Pawan Kumar
Pawan Kumar Mar 03, 2021 12:57PM ET
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Tomorrow may break 58 crude
The Chad Bull
The Chad Bull Mar 03, 2021 11:43AM ET
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We do not need oil and gas anymore we all work from home
Hans Billings
Hans Billings Mar 03, 2021 11:43AM ET
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lol
Jeff West
Jeff West Mar 03, 2021 11:43AM ET
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Lol do you think people like working from home for over a year+? Market is future focused, trying to gauge the level of demand for when things open up. If you think the demand will be the exact same when things open up, you are in for a real awakening.
Darryl Allen
Darryl Allen Mar 03, 2021 11:43AM ET
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imagine thinking oil is only for cars
Alan Rice
Alan Rice Mar 03, 2021 11:43AM ET
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CB- ha,ha !!
Jeff West
Jeff West Mar 03, 2021 11:25AM ET
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Would make less sense for OPEC to increase supply
Jason Maki
Jason Maki Mar 03, 2021 11:25AM ET
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that is what they said 2 days is that forgotten?
Jon Bal
Jon Bal Mar 03, 2021 11:24AM ET
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huh...so when prices go up producers increase production? we should study this phenomenon
Notvery Goodathis
Peteymcletey Mar 03, 2021 11:24AM ET
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Buy oil tankers
Arno Pfohl
JackR3acher Mar 03, 2021 11:07AM ET
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All that media hype comes down to reality. Highest ever surplus oil inventories in recorded history.
Jim Jones
Jim Jones Mar 03, 2021 11:07AM ET
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I would be selling oil futures like crazy too of fraud street was willing to run it up this high on more than half the demand from 2 years ago being wiped out.
Tem Clayton
Tem Clayton Mar 03, 2021 10:58AM ET
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It's a global oil sell off. Oil doesn't make economic sense in the long term
me ish
me ish Mar 03, 2021 10:58AM ET
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and this clearly shows that unlike the Texas politicians and oil and gas magnates' attempts at slandering renewables, it was in fact the fossil fuel industry that suffered by far the most by the cold weather. Their lies have been shown for what they are. It is more imperative than ever that we have independent news outlets such as The Intercept and people take the time and effort to not listen to corporate backed politicians for the truth.
Tobechukwu Olumba
Tobechukwu Olumba Mar 03, 2021 10:57AM ET
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can anyone tell me how to trade piles of oil?
Lonnie Shelton
Lonnie Shelton Mar 03, 2021 10:55AM ET
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I want a commodity forecasting job. They are way off all the time and it seems to be fine! lol. How can you bag a forecast this badly??
me ish
me ish Mar 03, 2021 10:55AM ET
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I find tea leaves are far more accurate.
Damian Wahner
Damian Wahner Mar 03, 2021 10:55AM ET
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It's All about Opec+ If they stand firm were of to the races but if they raise production by more than 750,000 barrels we heading down.
Lonnie Shelton
Lonnie Shelton Mar 03, 2021 10:55AM ET
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I want a commodity forecasting job. They are way off all the time and it seems to be fine! lol. How can you bag a forecast this badly??
Boswaks Olekeng
Boswaks Olekeng Mar 03, 2021 10:51AM ET
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hellos,anyone to teach me how to trade
Stephen Corsaro
Stephen Corsaro Mar 03, 2021 10:51AM ET
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only if you're interested in learning "random walk modeling" first. Google it . There are free course study programs and Python language courses to use it.
MarkB Smith
MarkB Smith Mar 03, 2021 10:51AM ET
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And crude prices continue to rally on this news?
Andy Zhou
Andy Zhou Mar 03, 2021 10:51AM ET
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Too wired. And the stock market even drops
 
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