US crude oil production rose to 44-year high in April

Oil prices found themselves under considerable selling pressure yesterday. 
Brent fell by 2.5% to $62 per barrel ad WTI even shed 4.2% to reach $57 per barrel, its most pronounced daily decrease in nearly three months and its lowest closing price since the end of April, notes Commerzbank. 

The price slide was sparked mainly by the inventory data published by the US Department of Energy which showed a surprising 2.4 million barrel increase in crude oil stocks - this was also the first inventory build in nine weeks. 

Significantly higher imports were chiefly responsible. A still very high rate of crude oil processing prevented an even sharper inventory build. One positive aspect worth noting is the decline in gasoline stocks by 1.8 million barrels, especially since this was due to a further rise in gasoline demand. At a good 9.7 million barrels per day, it nearly regained the extremely high level that it had reached at the end of May. 

Gasoline demand will doubtless increase even further this week in the run-up to the long fourth of July weekend, which points to widening gasoline crack spreads. Meanwhile, the slump in drilling activity in the US is beginning to have an impact on US crude oil production. Admittedly, output climbed to 9.7 million barrels per day in April according to the Energy Information Administration (EIA), which puts it at its highest level in 44 years.

It is likely to have peaked at this level, however, as the current production data are already lower, estimates Commerzbank. Last week saw US crude oil production decline slightly to just shy of 9.6 million barrels per day.