By Myra P. Saefong, MarketWatch
U.S. crude-oil inventories have climbed to their highest weekly level on record at the Energy Information Administration, and not just because of rising domestic production.
A number of factors, including strong oil imports, higher exploration and production company spending, and a slowdown in demand have combined to lift total commercial crude stockpiles to 518.1 million barrels for the week ended Feb. 10, according to EIA data dating back to August 1982.
That figure tops the former record of 512.095 million barrels for the week ended April 29, 2016.
“The continued growth in the stocks of crude is due to higher production in U.S. shale plays and imports that exceed the volume needed by refiners,” said James Williams, energy economist at WTRG Economics.
“We have enough petroleum inventory to cover close to 70 days of consumption, when the historical norm is well below 60 [days],” he said. The Organization of the Petroleum Exporting Countries is “trying to reduce it, but the effect of [its] efforts are not showing up in the U.S.”
MarketWatch asked several analysts how stockpiles managed to reach an all-time high, even as domestic crude production currently stands at 8.977 million barrels a day—below the record peak output of 9.61 million last seen during the week ended June 5, 2015.
Here are the reasons they came up with (in unranked order):
• Strong imports: “The real driving force has been the surge in imports,” said Troy Vincent, oil analyst at ClipperData.
‘The real driving force has been the surge in imports.’
Troy Vincent, ClipperData
The EIA on Wednesday report that crude imports for last week averaged 8.5 million barrels, down 881,000 barrels a day from a week earlier. However, over the last four weeks, they have climbed 9.9% vs. the same period a year earlier.
Matt Smith, director of commodity research at ClipperData, said that the U.S. saw nearly 10% more waterborne imports in 2016 than the year before.
“Bargain-basement prices for foreign oil in the last year have been too difficult for U.S. refiners to ignore,” he said. “We will likely see this trend ebb in the months ahead, as OPEC imports fall off—yet U.S. production is rising again to plug the gap.”
• OPEC: “Keep in mind the OPEC cut isn’t really fully felt inside the USA just yet,” said Nico Pantelis, head of research at Secular Investor.