By Barani Krishnan
Investing.com - Oil prices were little changed on Wednesday after a drop in weekly stockpiles of crude reported by the U.S. government offset a production hike announced by OPEC+.
West Texas Intermediate, the benchmark for U.S. crude, was down 23 cents, or 0.3%, at $87.97 per barrel by 1:25 PM ET (18:25 GMT).
London-traded Brent, the global benchmark for oil, was flat at $89.16 per barrel.
Oil markets entered the week on a 6-week rally, fueled by geopolitical concerns over the Russia-Ukraine conflict, and the pending monthly meeting of oil producers alliance OPEC+ — which never fails to provide its own drama to keep crude prices on the boil.
OPEC+, at the conclusion of that February meeting on Wednesday, approved another 400,000 barrels per day in production that will begin in March.
The global oil producers’ alliance had been increasing production by 400,000 bpd increments for months now after slashing as much as 10 million bpd in 2020, at the height of demand destruction caused by the coronavirus pandemic.
Initially, each production hike announced by OPEC+ weighed on the market. Lately though, they have not been making much impact amid evidence suggesting that many in the alliance were unable to grow output sufficiently anyway due to production constraints at oilfields which have been under-invested during the two-year long Covid-19 pandemic.
Wednesday’s OPEC+ announcement was further diluted by the Weekly Petroleum Status Report from the U.S. Energy Information Administration, or EIA. The report showed that crude stockpiles fell by 1.046 million barrels during the week to Jan. 28. Industry analysts tracked by Investing.com had expected a crude build of 1.525 million barrels instead.
Aside from the national crude stockpile, raw oil stored at the Cushing, Oklahoma delivery point for WTI — a closely-watched industry matrix — also fell last week by 1.2 million barrels, adding to concerns that the storage hub might be getting squeezed on supplies, some traders said.
Gasoline inventories increased 2.119 million barrels last week, the EIA report showed, compared with expectations for a build of 1.645 million barrels. Gasoline, known as petrol outside of the United States, is America’s premier fuel product.
Gasoline inventories had ballooned over the past month as refiners appeared to be maximizing fuel processing ahead of scheduled plant maintenance in March. Escalating winter temperatures in January also typically lead to less driving among Americans.
Distillate stockpiles, which include diesel and heating oil, fell by 2.411 million barrels against expectations for a draw of 1.492 million barrels, the EIA report showed. Distillates are refined into diesel for trucks, buses, trains and ships as well as fuel for jets.