U.S. crude oil inventories grow by 2.8 MMBO

Oil prices are down today after an inventory build that exceeded economists’ estimates by a factor of five.

According to data from Bloomberg, economists estimated an average build of 556 MBO, but the numbers released by the DOE today showed a build of 2.8 MMBO, bringing total inventories to 543.4 MMBO as global markets continue to work off the overhang in supply.

Production has rolled over, and continues to fall in the U.S., but demand still has not caught up with production. Weekly U.S. crude production figures showed output fell about 113 MBOPD, reports CNBC.

Production declines elsewhere adding some support

While the larger than expected inventory build has pushed prices down today, production outages around the world have lent some support to prices.

A wildfire in Alberta, Canada, has forced the evacuation of roughly 88,000 people from Fort McMurray, the heart of Canada’s oil sands operations. While major facilities are not in the fire’s path, major producers like Shell (ticker: RDSA) and Suncor Energy (ticker: SU) are reducing production so that workers and their families can reach safety, reports Reuters.

The wildfire now covers about 18,500 acres. Alberta Premier Rachel Notley said about 1,600 structures have been destroyed in Fort McMurray.

Overall production in OPEC increased in April by 14.9 MBOPD, according to secondary sources reported in OPEC’s monthly Oil Market Report. Production cuts from Libya and Nigeria have been supportive to prices, however. The two countries have lowered production by 41.4 MBOPD and 39.4 MBOPD, respectively.

Barclays said that “unplanned outages look unlikely to abate in the next couple of months, which have contributed to a tighter 1H16 oil market” and that “lower spare capacity, heightened disruption risk in Iraq and Venezuela, and lower supply ex-U.S. mean prices will likely average higher in Q4 than previously forecast.”

The bank expects Brent to average $44 per barrel this year, and WTI to average $42 per barrel. Brent is down more than 1.5% as of 2:30 p.m. EST to $44.27, while WTI is down 0.62% to $43.38.

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