Inventories Surge Higher
Crude oil prices have managed to remain near recent highs this week. This is despite the latest report from the Energy Information Administration highlighting a further rise in US crude inventories.
The EIA reported that in the week ending July 3rd, US crude inventories increased by another 5.7 million barrels. This is a wildly different result to the 3.1 million barrel decline the market was looking for.
Imports Rise Again
Regionally, crude levels in the Gulf Coast region rose the most. Levels there moved to record highs of 309 million, creating fresh fears over storage capacity in the US.
A great deal of this build was attributed to a fresh increase in imports. Net crude US imports jumped by 2.13 million barrels per day last week. Imports rose to 5.01 million barrels, hitting their highest level since the summer of 2019.
In the Gulf Coast specifically, imports jumped by 1.8 million barrels per day to 3.2 million barrels per day, marking their highest level since summer 2018.
Gasoline Demand Bouncing Back
However, despite news of an increase in the headline inventories number, oil prices remained supported amidst news of a strong drop in US gasoline stocks.
Fuel stores fell by 4.8 million barrels over the week, far outstripping analyst expectations for only a slight decline.
Despite the easing of lockdown measures over recent weeks, gasoline stocks had remained elevated up until the decline reported last week. This is encouraging evidence of the pickup in activity as people return to work and begin moving around again.
The summer is typically the highest period of demand for gasoline, dubbed “the summer driving season.” Hopefully, this latest report will help assuage fears that gasoline demand might remain low all summer.
However, despite the drop in gasoline stocks, distillate inventories, which include diesel and heating oil, were higher over the week by 3.1 million barrels.
This latest increase, which stands in stark contrast to the 75k barrel drop expected, takes inventory levels up to 177.3 million barrels, their highest level since the early 1980s.
Risk Sentiment Remains Supportive
Oil prices have been broadly supported over recent weeks. This is due to the resilience seen in equities markets.
Traders appear to be looking beyond fears of a second wave of the virus currently. Instead, they seem to be focusing on the tentative, post-lockdown recovery.
They’re also looking to the wave of central bank easing in response to the virus. This, for now, is keeping oil prices supported.
Oil Rally Running Out of Steam
The rally in crude oil continues to stagnate around the 61.8% retracement of the decline from 2020 highs.
However, while price holds above the 33.17 level, focus remains on further upside and an eventual break above the 42.43 level.
However, should price break back below the 33.17 level, focus will turn to deeper support at the 25.65 mark.