Crude oil prices moved higher today, after the Energy Information Administration reported an inventory draw of 5.1 million barrels for the week to April 21.
This compared with another draw, of 4.6 million barrels, for the previous week, and an estimated 6-million-barrel inventory decline for the week to April 21, as reported by the American Petroleum Institute.
The EIA also reported a decline in gasoline inventories and a smaller draw in middle distillate inventories for the week to April 21.
Gasoline inventories shed 2.4 million barrels last week, which compared with an inventory build of 1.3 million barrels for the previous week.
Gasoline production averaged 10 million bpd last week, which compared with 9.5 million bpd for the previous week.
In middle distillates, the EIA estimated an inventory draw of 600,000 barrels for the week to April 21, with production averaging 4.7 million barrels daily.
This compared with an inventory draw of 400,000 barrels for the previous week, with average daily production at 4.8 million barrels.
Refineries in the United States processed an average 15.8 million barrels daily last week, operating at 91.3% of capacity.
The larger than expected decline in inventories as estimated by the API failed to affect prices in a positive way on Tuesday but earlier today prices began climbing as the report drew traders’ attention to the supply side of the oil market.
Worry about demand remained, however, capping any potential gains, after Treasury Secretary Janet Yellen called on Congress to raise or suspend the debt ceiling to avoid an “economic catastrophe”.
"A default on our debt would produce an economic and financial catastrophe," the Treasury Secretary said on Tuesday, as quoted by Reuters. "A default would raise the cost of borrowing into perpetuity. Future investments would become substantially more costly."
At the time of writing, Brent crude was trading at $79.06 per barrel and West Texas Intermediate was changing hands at $75.77 per barrel, both down from opening.
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By Irina Slav for Oilprice.com
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Obviously these fears are far more bearish than an inventory withdrawal of 5.1 million barrels hence the virtual lack of a meaningful rise in oil prices.
Moreover, the decline in oil prices has nothing to do with oil market fundamentals as these are still very robust and virtually everything to do with growing fears of a banking crisis.
A sign of the weaknesses is US Treasury Secretary Janet Yellen calling on Congress to raise or suspend the debt ceiling to avoid an “economic catastrophe” adding that "a default on our debt would produce an economic and financial catastrophe and also would raise the cost of borrowing.
Such a call coming against a background of US debt hitting $30.9 trillion or 135% of GDP in 2022 and federal deficit rising to $1.1 trillion in the first half of the fiscal year ending in March or 65% larger than the same period a year earlier has added to market worries and adversely impacted prices.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert