Oil rises as markets shrug off bearish inventory report

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Oil prices were little changed on Wednesday afternoon despite a massive inventory build reported earlier in the day by the Energy Information Administration.

The EIA had reported a crude oil build of 15.189 million barrels for the week, sending U.S. oil inventories to 503.2 million barrels, or 11% above the five-week average for this time of year.

It was the second-largest crude inventory build on record, after a 19+ million barrel build earlier this year, in April, according to EIA data.

Oil prices often react violently to major crude builds, especially when inventories are already high. But, armed with positive vaccine news, oil prices leveled off in the afternoon.

WTI was only trading 0.18% down on the day at 6pm EDT at $45.52, and Brent crude was actually trading up 0.29% on the day at $48.98, as the market is still full of vaccine candidate optimism, notably out of the UK, which started mass vaccinations on Tuesday.

All this optimism is overriding the persistently low oil demand and EIA data that showed that U.S. oil exports had fallen to their lowest levels since October 2018, and U.S. net imports of crude saw the biggest increase ever.

Another contributing factor to the steady prices is the attacks on two oil wells in the Khabbaz oilfield in Iraq, although the two wells combined produced less than 2,000 bpd prior to the attack.

More vaccine news is expected on Thursday when a group of advisors is expected to vote on whether the FDA should grant an emergency authorization for Pfizer’s Covid-19 vaccine. Any positive developments on the vaccine front are expected to lift oil prices, even in the wake of this week’s large inventory build.