Oil Continues to Crash After EIA Reports Biggest Inventory Build in 34 Years

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After the API shocked markets by reporting a massive 9.3-million-barrel increase in U.S. inventories yesterday, the EIA added insult to injury, saying inventories instead went up by 14.4 million barrels in the week to October 28, reaching 482.6 million barrels. The silver lining is that the total is within the upper limit for the time of year, according to the EIA data.

We suspect the markets won’t find much in the way of this silver.

Last week, the authority reported a meager 600,000-barrel decline in crude oil stocks, which despite its meagre size, managed to sway the market, pushing up benchmark prices.

Read Oil Prices Slammed By Higher OPEC Exports

In other news, in the seven days to October 28, gasoline inventories experienced a 2.2-million-barrel draw, on top of a 2-million-barrel decline for the previous week. They are still above the maximum for this time of year.

Earlier this week, gasoline prices in the U.S. got a 10-percent push after an explosion at Colonial Pipeline’s Line 1 in Alabama that caused one fatality. The accident happened less than two months after the pipeline operator was forced to shut down Line 1 because of a leak, sparking a gas-shortage panic in the East Coast.

Refineries, operating at 85.2 percent of capacity, processed 15.4 million barrels of crude in the reporting period, churning out 9.8 million barrels of gasoline and 4.7 million barrels of distillate fuel daily.

The EIA’s report is watched even more closely than normal amid shaky markets caused by growing doubts that OPEC will manage to hammer out an output freeze deal. In addition to Iraq’s insistence to be exempted from any such deal because of its urgent need of oil revenues to continue fighting IS, news came that Libya and Nigeria are quickly increasing their output, seeking to make up for lost revenues.

Hopes are dwindling that even if an agreement is reached, and even if Russia joins it, it would do little to restore the market balance, as Libya and Nigeria – both already exempt from the freeze talks – added a combined 800,000 barrels to global oil supply last month.

Brent crude traded at US$46.87 a barrel at the time of writing, down 2.6 percent, and WTI was at US$45.31, down 2.91 percent.

By Irina Slav for Oilprice.com

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