The inventory change compared with a draw of 2.2 million barrels for the previous week, which, however, did not affect prices as expected because the EIA also estimated a substantial increase in gasoline inventories, sparking concern about the health of demand.
For the first week of October, the EIA reported a gasoline inventory decline, to the tune of 1.3 million barrels. It compared with a build of 6.5 million barrels for the previous week.
Gasoline production last week averaged 9.7 million barrels daily, which compared with 8.8 million bpd for the last week of September.
In middle distillates, the Energy Information Administration estimated an inventory draw of 1.8 million barrels for the week to October 6, which compared with a draw of 1.3 million barrels for the previous week.
Middle distillate production averaged 4.7 million barrels daily, almost unchanged on a week earlier.
Prices, meanwhile, have been on the seesaw since the start of the week but were on the retreat on Thursday after the American Petroleum Institute reported a crude inventory build of almost 13 million barrels for the week to October 6.
The massive estimated increase in inventories sent prices tumbling despite the war premium that the latest events in the Middle East have added.
Commenting on that premium, ING analysts said in a note that if the conflict remained limited to Israel and Palestine, the war premium would slowly “erode”. If Iran entered the fray, however, the U.S. response in the form of sanctions would contribute to a tighter supply situation next year.
As regards the massive API reported build, this could be the result of refineries entering seasonal maintenance, meaning it would be temporary. On the other hand, JP Morgan analysts said in a note that fuel prices are beginning to destroy demand, suggesting stronger bearish pressures further down the road.
"Fuel prices may be closer to consumers' pain threshold than inflation-adjusted prices might suggest. There are already signs that consumers have responded by cutting back on fuel consumption,” the analysts said, as quoted by Reuters.
By Irina Slav for Oilprice.com
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