The recent jump in U.S. crude imports could reverse from March as major oil exporters start cutting production, Goldman Sachs analysts said in a note.

The latest Energy Information Administration (EIA) report released on Wednesday found that U.S. crude inventories surged in the week ended Feb 3 by 13.8 million barrels – the second largest weekly build up on record.

However, the rise did not shock the market, since preliminary data from the American Petroleum Institute (API) late on Tuesday had indicated an even bigger increase.

Goldman Sachs attributed the recent jump to an increase in imports, especially those from the Gulf Coast. However, output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other producing nations could reverse this trend.

“Given the relatively high compliance to the proposed cuts so far, we believe that this import channel will reverse from March onward,” the analysts said in the note.

The analysts explained that the average crude transit time from the Arabian Gulf to the U.S. Gulf Coast is 47 days. With freight data showing a decline in vessel demand in January, this means arrival to the U.S. should slow down by early March.

“As a result, we do not view the recent excess U.S. builds as derailing our forecast for a gradual draw in inventories, with in fact the rest of the world already showing signs of tightness.”

Goldman Sachs also noted that a key manufacturing indicator, the Purchasing Managers’ Index (PMI), has continued to show strength globally since late-2016. This may support global demand and accelerate the rebalancing of the oil market.

The bank’s global demand growth forecast is at 1.5 million barrels per day in 2017.

Oil prices rose following the release of the EIA report, with investors covering short positions as the rise in U.S crude inventories was not as massive as many had feared, and as gasoline futures got a boost from a surprise decline in inventories of the fuel.

Source: CNBC