Supply Data Weighs on Oil while Output Cuts and Forecasts Provide Support

Oil prices declined on Tuesday for the second consecutive session, amid expectations for a buildup in U.S. crude supplies.

A recent S&P Global Platts poll of market analysts estimated that oil inventories increased last week by 2.7 million barrels, following a huge surge of 21.6 million barrels in the week before, which also saw gasoline stockpiles falling by 13.6 million barrels, and distillate inventories decreasing by 9.7 million barrels.

The readings of last week were attributed to the continuing closure of many refining facilities in Texas, due to the recent winter storms, while most of production facilities returned to normal levels of output.

Data by the American Petroleum Institute (API) estimated that crude oil inventories in the United States grew by 12.8 million barrels for the week that ended on March 5.

The API also estimates that gasoline stockpiles declined by 8.5 million barrels, while distillate inventories decreased by 4.8 million barrels.

The more accurate and official data that show the changes in U.S. oil inventories are due on Wednesday by the Energy Information Administration (EIA).

Brent crude futures for May delivery closed Tuesday’s trading session lower by 72 cents, or 1.1%, a $67.52 per barrel, while the West Texas Intermediate (WTI) futures for April delivery lost $1.04, or 1.6%, to settle at $64.01 per barrel.

The decline in oil futures was also attributed to selling pressures due to profit making, after oil contracts rose on the back of a decline by the U.S. Dollar (USD) and Treasury bond yields.

Meanwhile, geopolitical tensions in the Middle East continue to provide some support to oil futures.

On the other hand, the EIA’s monthly report raised its expectations for crude prices after major producers forming the OPEC+ alliance decided to extend output cuts until the end of April.

The report expects oil WTI price will average $57.24 per barrel in 2021, increasing the forecast by 14% compared with January’s monthly report.

The administration also sees the U.S. benchmark crude averaging $54.75 in 2022, 6.2% higher the previous estimates.

Meanwhile, expectations for the global benchmark Brent futures were raised by nearly the same percentages, seen at an average of $60.67 this year and $58.51 in 2022.

The monthly report of EIA also expected the U.S. production of oil to average 11.15 million barrels per day (b/d) in 2021 and 12.02 million b/d in 2022.