Crude oil futures were higher on Wednesday, with traders shrugging off the US Energy Information Administration’s latest inventory data, which showed a larger-than-expected increase in weekly oil stocks.
According to the EIA, domestic crude oil supplies rose by 4.1 million barrels in the week ended Jan. 6. Stocks of oil products also jumped. Gasoline supplies rose by 5 million barrels and distillate stockpiles jumped up by 8.4 million barrels. Analysts polled by S&P Global Platts forecast a climb of 1.75 million barrels. The American Petroleum Institute reported late Tuesday a rise of 1.5 million barrels in US crude oil stocks.
WTI crude oil futures were up 1.2% before the data, but gains accelerated in the aftermath with WTI futures recently up 2.5%.
Investors shrugged off the inventory data and instead bought back into the commodity after it collapsed 6% in the last two sessions. Overall, traders are positive about oil’s prospects for at least the next few months as OPEC and major non-OPEC members implement their output cuts.
Longer term, the outlook is murky. If oil prices show a positive price response oil producers might overshoot their output targets to capitalize. In addition, there are worries that the US will quickly ramp up production and this could give other oil producers an excuse to accelerate their production.
Lately, the data has suggested the US shale oil production is on the upswing. Last Friday, Baker Hughes reported a weekly rise in active US oil rigs, it was the 10th straight week that the number of active rigs in the US increased. The Department of Energy said US crude oil production will average 9 million barrels a day in 2017 and will grow to 9.3 million barrels in 2018. In the last full week of 2016, US oil production was 8.8 million barrels a day.