A day after the American Petroleum Institute pushed prices up by surprising the market with a draw across the crude oil and fuels inventory board, the Energy Information Administration reported a draw in crude oil and another draw in gasoline inventories for the week to July 20.
Crude oil inventories were 6.1 million barrels lower in July 16-20 than in the week before, when the EIA reported a surprise build that made the price rally stutter. Inventory data has been mixed this year, with draws during refinery maintenance season and builds during driving season going counter to seasonal patterns.
In gasoline, the EIA said, inventories last week shed 2.3 million barrels, with production averaging 10.3 million barrels daily slightly lower than last week’s average.
Distillate inventories were down by a modest 100,000 barrels, with production at 5.2 million bpd, virtually unchanged on the week.
Refineries processed 17.3 million barrels daily last week, compared with 17.2 million bpd a week earlier.
Oil prices have been on the mend this week as U.S.-Iran tensions and the API inventory draw
offset earlier concern about global oversupply that had pushed WTI back below US$70 a barrel earlier this month.
Yet the situation remains unstable. Despite the supply disruption potential in Iran, Libya, and Venezuela—where the IMF has predicted an inflation rate of a million percent—there are also bearish factors at play such as U.S. production, which last week hit the 11-million-bpd mark for the first time.
While most analysts seem to remain bullish on crude over the short term, Citi’s Ed Morse is a notable exception, forecasting Brent at US$45-65 a barrel next year, citing factors such as production and capital efficiency and wrong assumptions on the part of oil bulls.
There is also concern about the global growth in oil demand, which has been dampened by the recent rally. Emerging markets, which are at the heart of every upbeat global economy prediction, cannot maintain their pace of growth with costlier oil, so demand will probably ease until prices fall to a more palatable level.