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Oil Falls Despite Crude Inventory Draw

A day after the API’s estimated oil inventory draw of 6 million barrels failed to impress the market, the Energy Information Administration may have succeeded after reporting a draw of 1.4 million barrels of crude for the week to August 3.

After last week the EIA reported an inventory build of 3.8 million barrels, analysts had forecast a draw of 1.2 million barrels this week.

A day after the first round of U.S. sanctions against Iran went back into effect, oil prices remained largely indifferent, with Brent crude trading at US$73.52 a barrel, with West Texas Intermediate at US$67.83, both down slightly from a day earlier at the time of writing.

The EIA said refineries last week processed 17.6 million barrels of crude daily, compared with 17.5 million bpd a week earlier, with gasoline production at 9.9 million bpd and distillate production at 5.2 million bpd. This compares with 10.5 million bpd of gasoline and 5.2 million bpd of distillate a week earlier.

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Gasoline inventories added 2.9 million barrels last week and distillate inventories were up by 1.2 million barrels.

Production was likely stable at a little below 11 million bpd last week, with imports up by 182,000 million barrels to 7.9 million bpd. In the previous week, imports averaged 7.7 million barrels daily.

The response of oil prices to API’s report on inventories suggests market players have already factored in the immediate effects of U.S. sanctions against Iran on prices, hence volatility has been reigned in to an extent. Related: Crackdown Looms As Maduro Survives Assassination Attempt

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The sanctions that went into effect yesterday target Iran’s trade in U.S. dollars, which includes oil, metals, coal, and cars. The second round, to come into effect on November 4, will directly target Iran’s petroleum industry.

Despite a general unwillingness among Iranian crude oil buyers to start cutting their imports, many have done jut that worried about repercussions from the U.S. if they don’t. China is the only one that has flatly refused to reduce its intake of Iranian crude although it did say it will not expand its Iranian imports.

Any development in the U.S.-Chinese trade war, however, could change its mind: Beijing this week threatened it could impose tariffs on U.S. LNG imports.

By Irina Slav for Oilprice.com

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