Crude Inventories Fall Again
The latest report from the Energy Information Administration this week has helped further the cause of oil bulls. The EIA reported that in the week ending July 31st, US crude oil inventories fell by 7.4 million barrels.
This comes after a massive 10.6 million barrel decline over the prior week.
The decline has helped further support the view that oil markets are beginning to rebalance now. This is in response to the steady stream of OPEC oil production cuts over the year as well as the global pickup in activity and demand thanks to the easing lockdowns.
Gasoline Inventories Rise
Despite news of yet a further large drawdown in US crude levels, the gasoline inventories number disappointed yet again.
The EIA reported a 419k barrel increase over the week, after a 700k increase the week prior. The gasoline inventories number continues to sit at odds with the headline crude inventories number. This suggests that motor demand has stalled somewhat.
This could likely be explained by the fact that as many as ten US states have re-entered lockdown over the last month. Meanwhile, several other states have postponed reopening plans, all in response to a severe uptick in new infections and deaths across the US.
Elsewhere, the report showed that distillate fuel inventories were higher again over the week. These rose by 1.6 million barrels. Gasoline production, meanwhile, averaged 9.3 million barrels per day. This marked a slight increase from the prior week’s 9.2 million barrel per day average.
Crude Demand Forecasts Slashed
The report from the EIA comes just shortly after the IMF announced that it expected crude oil demand to suffer an 8% decline this year.
Prices are due to be 41% lower than they were last year on average. The IEA also update its oil outlook this week and made a similar projection. It forecasted a 7.9 million barrel per day decline in crude demand, on average, over the year.
Meanwhile, OPEC estimated a larger 8.9 million barrel decline in crude demand.
Crude Oil Breaking Out
Following a brief dip below the rising trend line which marks the support of the ascending triangle formed over recent months, crude oil prices reversed higher this week. They are now fighting to break out above the 42.43 level. While prices hold above this level, the next upside target to note is a test of the 78.6% retracement from year to date highs around the 52 mark.