First Crude Inventories Drop In A Month

Huge Inventories Drop

Oil markets managed to retain a positive tone this week as the latest data from the Energy Information Administration offered some support.

The EIA reported that in the week ending June 26th, US crude inventories declined by 7.2 million barrels.

This downward adjustment to inventory levels far exceeded analyst expectations for a 710k barrel drop. It also brings inventory levels down from previous record highs of 540.7 million barrels.

However, despite the move, inventories remain 15% above the five-year seasonal average. This is on the back of the massive drop in demand noted during the worst of the COVID-19 lockdown period.

Imports Reduce

Net US imports were greatly reduced over the week, falling by 506k barrels per day.

Prior to this reading, imports had been one of the key drivers of the rise in inventory levels. This is due to the receipt of shipments booked during the price crash suffered in the Saudi – Russia price war earlier in the year.

Shipments from Saudi Arabia have now fallen back to just 826k barrels per day, their lowest level in six weeks.

Gasoline Demand Low

However, the report was not totally bullish for oil.

Interestingly, gasoline stocks were higher over the week by 1.2 million barrels. This increase came in stark contrast to the 1.6 million barrel drop forecast. This once again reflects a surprising lack of demand given the ongoing reduction in lockdown measures across the US.

Distillate stockpiles, meanwhile, were lower over the week, falling by 593k barrels to 174.1 million barrels.

Elsewhere, the data showed that US refinery crude runs were higher by 193k barrels per day. Refinery utilization rates rose by 0.9%, taking them back up to 75.5% of capacity, the highest they’ve been in months.

Second Wave Fears Threatening Demand

While the headline rise in crude oil inventories is clearly bullish for oil traders, the disappointment at still-weak gasoline demand has offset the positive impact from this report. This created midweek volatility in oil prices.

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