The Saudi Oil Minister, Khalid Al-Falih, says that OPEC cuts have exceeded expectations of 1.5 million barrels of oil a day, but you would not know it by the jaw dropping 11.6-million-barrel crude oil increase reported by the American Petroleum Institute (API). Even with a bullish 5-million-barrel drop in gasoline supply, the largest weekly drop since April of 2014, and a supportive 2.9-million-barrel drop in distillates the shock value of that massive crude oil build was too hard to just shake off.

We know that the U.S. said that they would be selling 10 million barrels of oil from the Strategic Petroleum Reserve (SPR) last month and it is possible that some of that increase might have been because of that sale. We will look at the Energy Information Administration (EIA) weekly status report to see if we saw a corresponding drop in SPR supply. SPR supply did fall last week but only by a modest amount. The API is voluntary reporting they may report in a different time frame as to when the private entity reports its supply. The EIA reports it at the time it leaves their storage.  The API also reported a 788,000-barrel build in inventories at the Cushing, Oklahoma facility which would be the third increase in the last 6 weeks.

This comes as OPEC and Non-OPEC members say that it is very possible that they are going to extend production cuts. As reported by the Investor Business Daily “Saudi Arabia’s energy minister said Tuesday that “conformity by all” will be a criterion for OPEC’s de facto leader to agree on any extension of a production-cut pact. At IHS’ CERAWeek energy conference in Houston, Khalid Al-Falih said the output deal is “so far so good,” but his country “will not bear the burden of free rides” by others in the agreement as Saudi Arabia takes the brunt of the production cuts. “This is for the benefit of all and needs to be achieved by all,” he added.

Falih said Russia’s cuts in February weren’t enough. But Russian Energy Minister Alexander Novak told him Monday that cuts for the first week of March were better. Phil Flynn, senior market analyst at Price Futures Group, said it’s hard to tell which countries Al-Falih could be talking about, but they could include Russia, Iran, Iraq and Libya. But he thinks Saudi Arabia is laying down its initial negotiating position, with statements from other oil ministers to follow. While markets were concerned how Iran would respond as an exempt country, Flynn told IBD “There hasn’t been a lot of disappointment with Iran’s production; Iran’s not going as crazy as they could have.”