The Energy Information Administration offered jittery oil markets respite today by reporting a draw of 4.7 million barrels in U.S. commercial oil inventories. The report comes just one day after the American Petroleum Institute reported a build in inventories, estimated at 1.628 million barrels, versus expectations of a draw of 3 million barrels.
Also yesterday, Ecuador announced its plans to abandon OPEC’s production cut deal and boost production to shore up its finances. The news dropped like a stone in a calming lake, as market participants and observers sat in wait for the next meeting of OPEC and Russian energy ministers next week that some hope will result in an announcement of deeper production cuts. Now that Ecuador has quit the game, OPEC’s position has become more precarious, as more members might choose to follow Ecuador’s example—a move that could put an end to the deal.
The EIA reported hefty draws in inventories in the last two weeks, and this week’s figure should go towards instilling some stability in a once again nervous market.
At 490.6 million barrels, commercial inventories in the world’s largest oil consumer are within seasonal limits, which wasn’t the case six months ago. This can most easily be attributed to higher refinery runs during summer driving season, which suggest that later this year, we could see a rebound in inventories—but for now at least, the news is good.
Refinery runs last week averaged 17.1 million bpd, down from 17.2 million bpd in the prior week, producing 10.1 million bpd of gasoline. This compares with 10.5 million bpd in the week before. Gasoline inventory figures added to the optimism: these were down by 4.4 million barrels after a 1.6-million-barrel draw during the week to July 7.
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WTI oil reacted directly after the EIA data release and was up nearly 1.5% at 09:40 AM CST, while Brent crude prices rose 1.52% to $49.58.
By Irina Slav for Oilprice.com
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