Government data released on Wednesday revealed that US crude inventories experienced a much smaller decline than anticipated last week, constituting only a quarter of the expected levels. This drop occurred despite the cessation of supply injections from the national reserve, which had often been blamed by oil bulls for negative market perception.
The Weekly Petroleum Status Report by the Energy Information Administration (EIA) also showed underwhelming changes to fuel inventories. Both gasoline and distillate balances decreased less than the forecasts, raising concerns about demand during the summer travel period, which would typically result in significant draws.
For the week ending July 21, the US crude inventory balance declined by 0.6 million barrels, in stark contrast to the 2.348 million-barrel decline projected by industry analysts tracked by Investing.com. In the previous week (ending July 14), crude stockpiles had slid by 0.708 million barrels following a substantial build of 5.946 million barrels the week before – the largest increase in a month.
Interestingly, the weak crude draw reported by the EIA did not include the market’s previous caveat – the release of crude from the US Strategic Petroleum Reserve. For months, weekly drawdowns from the reserve had been a point of contention for oil bulls, who claimed that the additional oil often suppressed crude prices from rallying. However, the so-called SPR draws ceased two weeks ago, leaving uncertainty about whom long oil enthusiasts would blame if crude prices were to drop from this point onward.
With just a few days left in July, both US crude and Brent are currently enjoying a 12% gain for the month, largely based on the assumption that demand for oil would soar.
The lower-than-expected crude draw from last week was also influenced by the much-discussed million-barrel-per-day production cut supposedly implemented by the Saudis for the entirety of July, which once again raises questions about who should be held accountable for the subpar market optics.
In terms of gasoline inventory, the EIA reported a draw of 0.786 million barrels for the past week, whereas analysts had predicted a decline of 1.678 million barrels. The prior week had seen a drop of 1.066 million barrels. Automotive fuel gasoline remains the top US fuel product.
The finished motor gasoline products delivered to the market, an indicator of pump demand, reached 8,939 million barrels, surpassing the previous week’s 8,855 million barrels but still falling below the seasonal norm, which typically sees the supply of 9.5 million barrels or more each week.
Regarding distillate stockpiles, the EIA reported a draw of 0.245 million barrels, slightly less than the 0.301 million barrels forecasted for the last week, but still an improvement from the previous build of 0.014 million barrels. Distillates are refined into heating oil, diesel for various modes of transportation, and fuel for aircraft.
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