Crude Rises As US Production Slows And Inventories Decline

weekly crude oil inventories report

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Following a recent string of supply inventory surpluses which have weighed on price, crude was higher yesterday after news of a larger than expected drawdown.

The latest report from the Energy Information Administration showed that in the week ending June 14th, US crude stockpiles fell by 3.1 million barrels. This was almost three times more than the forecast 1.1 million barrel drawdown the market was looking for.

The data also showed that US gasoline inventories were down 1.7 million barrels over the week. Again, this far outstripped analyst expectations for a 935k barrel rise. This latest decline brings inventory levels down from levels which recently rose to their highest point since July 2017.

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Net Crude Imports Fall

Distillate stockpiles, which include diesel and heating oil, were also seen falling over the week. These moved lower by 551k barrels.

This was in stark contrast to the forecasted 712k barrel increase. Elsewhere, the report showed that net US crude imports were down by 444k barrels. Meanwhile, exports rose by 300k barrels per day to 3.4 million barrels per day. This is just under the 3.6 million barrel per day record hit in February.

The data also showed refinery crude runs having risen over the week by 200k barrels per day. And refinery utilization rates edged up by 0.7% to 93.9% of total capacity, marking their highest levels since January.

US Crude Production Softens

The report had further good news for crude bulls. It showed that domestic crude production had fallen 100k barrels per day. Production is now at 12.2 million barrels per day, slipping back from the record high of 12.4 million barrels per day hit 2 weeks ago.

Despite the drawdown in overall crude levels, crude inventories are still at 482.4 million barrels. This is around 7% higher than the 5year average seasonally.

Indeed, crude stores at the Cushing delivery hub in Oklahoma rose by 642k barrels to 53.6 million, their highest levels since December 2017.

Trade War Still Weighs

Crude has been heavily weighed on over recent months. This is due to fresh escalation in the trade war between the US and China.

Last year, the ballooning trade war between the world’s two largest economies was responsible for driving crude heavily lower. While the declines have paused for now, with neither the US or China looking like backing down, there is a very real threat of yet a further escalation and crude prices taking another step down.

Iran Conflict Supports

Away from the trade war, the threat of potential military conflict between the US and Iran also remains a very real presence.

However, for now, it seems the market has been downplaying these rising tensions. And this usually translates into higher oil prices. This is likely due to the current sanction on Iranian oil which restricts a large percentage of Iranian exports.

Technical Perspective

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The recent block of consolidation has seen oil settling between the 61.8% retracement from last year’s lows at 51.50 and the broken 59% retracement at 54.37. Price is now breaking back above here, putting focus on the next topside level to watch which is the 57.16 zone. To the downside, any break lower will put focus on a move into the 47.49 level support next, which is the 78.6% retracement from last year’s lows.

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