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EIA Inventory Report Sends Oil Higher

Crude oil inventories in the United States shed 5.1 million barrels in the week to May 28, the Energy Information Administration reported today, adding inventories were now at 3 percent below the five-year average for this time of the year.

A day earlier, the American Petroleum Institute estimated crude oil inventories had declined by a solid 5.36 million barrels in the reporting period, pushing prices higher.

Analysts had expected the EIA to report an inventory decline of 2.114 million barrels.

In gasoline, the EIA estimated an inventory build of 1.5 million barrels for the week to May 28, compared with a draw of 1.7 million barrels for the previous week. Gasoline production last week averaged 9.6 million bpd, which compared with 9.7 million bpd a week earlier.

In middle distillates, the EIA reported an inventory increase of 3.7 million barrels, with average production at 4.8 million bpd. This compared with a stock draw of 3 million barrels a week earlier and average daily production of 4.7 million bpd.

EIA’s report will likely add fuel to an already strong price rally prompted by improving demand despite flare-ups of Covid-19 in Asia as economies in Europe and the United States begin to return to normal.

OPEC+ was the latest to signal strong optimism regarding demand as it confirmed it would stick to plans to relax production cuts further from next month. At the same time, the cartel brushed off the possibility for some 2 million bpd of Iranian crude to return to international markets before too long, suggesting its outlook for demand was strong enough.

Brent crude breached the $70 mark earlier this week and was above it at the time of writing still, trading at $71.56 a barrel. West Texas Intermediate was changing hands at $69.04 a barrel.

A lot of U.S. economic data is coming out later today from the Institute of Supply Management, and if it misses expectations, some of that data could dampen the rally for a while until the return of travel takes the upper hand again as the main factor for oil demand improvement.

By Irina Slav for Oilprice.com

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