Oil prices received an upside boost this week from the latest industry reporting which showed a further drawdown in US inventory levels. On Tuesday, the American Petroleum Institute reported a massive 11 million barrel drawdown in crude levels. This caused a strong topside move in oil. On Wednesday, focus then turned to the headline report from the Energy Information Administration.
The EIA report covering the week ending August 23rd, showed US crude stores falling 10 million barrels over the week. This far outstripped expectations for a 2.1 million barrel decrease. It also took crude stores down to their lowest levels since October 2018. US crude stores are now at 427.8 million barrels, sitting exactly on their five-year average for this time of year.
Net Crude Imports Fall
The data showed that Net US crude imports fell by 1.51 million barrels per day to 2.9 million barrels per day. Imports in the Gulf Coast region crashed by 387,000 barrels per day last week, to hit their lowest on record at just 1.2 million barrels per day.
This is based on EIA data going back to 1990. The report also showed that crude stocks at the Cushing, Oklahoma, delivery hub were down by 1.98 million barrels. Stocks fell to their lowest since December at 40.4 million barrels.
Refinery crude runs were also down by 294,000 barrels per day over the week, with refinery utilization rates down by 0.7% to 95.2% of total capacity.
Gasoline Stocks Down
The EIA also showed that gasoline stocks fell by 2.1 million barrels. This far exceeded analysts’ expectations for a 388,000-barrel decline. Distillate stockpiles, which include diesel and heating oil, fell by 2.1 million barrels, versus expectations for a 918,000-barrel increase, according to the report.
However, the report was not all bullish for crude as the data also reflected a 200k barrel increase in US crude production. Production has now moved up to fresh all-time highs of 12.5 million barrels per day.
Trade War Still In Focus
Crude prices have also been responding this week to shifting sentiment towards the ongoing US-China trade negotiations. On Friday, crude had been heavily sold as China announced a fresh set of 10% tariffs to be applied to a further $75 billion of US goods. This was in response to Trump’s new tariffs due to hit (in part) on September 1st. Trump initially responded aggressively, saying that he would instruct all US companies to cease operating in China.
However, on Monday, during closing remarks at the G7 meetings in Biarritz, Trump appeared to change his approach. Instead, the President said that the two sides would continue working together and that he remains confident that a “great deal” can be done.
The descending triangle pattern in crude continues to suggest the risk of a break below the 51.27 level, targeting a bigger drop down to the 42.25 zone. The local bearish trend line from July highs continues to cap upside for now, putting focus on a further move lower unless we see a topside break. However, unless price gets quickly back above the 60.91 level, focus remains on a further grind lower for now.