CHART: The United States is swimming in crude oil

The United States has got a lot of crude oil on its hands right now.

According to data released by the US Energy Information Administration (EIA) overnight, stockpiles swelled by a further 4.95 million barrels to 533.1 million barrels.

That was near double the 2.8 million inventory build expected, and left stockpiles at the highest level on record.

A lot of crude, not only in absolute levels, but also based on current consumption levels.

This chart from the Commonwealth Bank underlines that last point.

Source: Commonwealth Bank

Based on days of supply, inventories currently sit at the highest levels in six years.

“US oil stockpiles trended lower through most of last year because of the fall in US supply, but this trend is reversing as US oil production increases,” said Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank following the release of the EIA report.

“US oil output lifted to around 9.1 million barrels per day (mb/d) last week, and is now only around 0.5mb/d below peaks reached in June 2015.”

And even with bloated inventory levels, US crude production is expected to lift even further this year and next based off latest forecasts offered by the EIA, an outlook underpinned by a doubling of oil rigs in operation from the levels of May last year.

“US data suggests that oil prices around $US50 per barrel are encouraging the restart of idled US shale oil output, says Dhar, noting that “supply has proven more resilient, lower-cost and quicker to respond than predicted”.

Even with murmurings about a possible extension to production cuts implemented by OPEC and non-OPEC members in the first half year, Dhar says that the risk to his average crude price of $US50-60 per barrel this year appear slanted to the downside due to the ongoing lift in US supply.

Front-month WTI crude futures currently trade at $US48.22 per barrel, having fallen over 12.5% from the multi-year high of $US55.24 per barrel struck earlier this year.

On Wednesday, WTI futures briefly fell to $US47.01 per barrel, the lowest level since OPEC announced its production cuts in late November last year.

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