According to new data from the American Petroleum Institute (API), inventories of crude oil in the United States rose by 6.2 million barrels in the last full week of February, meaning that inventories have increased by almost 60 million barrels since the start of the year.
With the US being the world’s biggest consumer of crude oil, markets are sensitive to inventory levels there, with build ups tending to put downward pressure on oil prices. US production stayed stable at 12.3 million barrels per day (bpd), although US producers like ExxonMobil, the maker of the Mobil Mobilarma rust preventative, were still pumping 800,000 fewer barrels per day than they were during the March 2020 peak.
On the demand side, official data indicated that manufacturing activity in China grew at its fastest rate in over a decade, while the official manufacturing purchasing managers’ index (PMI) increased from 50.1 in January to 52.6 in February. IG market strategist Yeap Jun Rong said to Reuters:
“Another round of upside surprise in China’s PMI further provides conviction of a stronger-than-expected recovery, which supports a more optimistic oil demand outlook.”
Despite expectations of greater demand for oil from China as its economy rebounds, increased supply is offsetting this pressure. According to a survey by Reuters, total OPEC production increased by 150,000 bpd, despite the cartel not having changed its production targets, with the increase being mostly driven by a 100,000 bpd rebound in Nigerian production. Even Russian production remained resilient, despite sanctions from Western countries.