Oil Prices Soar After EIA Reports Large Crude Draw

A week after it reported the heftiest crude oil draw in more than six months, the Energy Information Administration once again had good news for oil bulls: the authority said crude oil inventories had shed 7.4 million barrels during the week to July 31.

A week earlier, the EIA said inventories had lost as much as 10.6 million barrels, after a build of 4.6 million barrels for the second week of July. Analysts had expected an inventory decline of 3.267 million barrels for the week to July 31.

A day before the EIA, the American Petroleum Institute reported an inventory draw of 8.587 million barrels for the last week of July.

In gasoline, the EIA reported an increase in inventories of 419,000 barrels, after a 700,000-barrel build estimated for the previous week. Gasoline production last week averaged 9.3 million bpd, compared with 9.2 million bpd a week earlier.

In distillate fuels, the authority estimated an inventory increase of 1.6 million barrels for the week to July 31. This compared with a build of half a million barrels a week earlier. Production of distillates last week averaged 4.9 million bpd, compared with 4.8 million bpd a week earlier.

Prices jumped after the API inventory report on Tuesday, even though worries about the sustainability of any demand improvement remain strong. The rally continued today, too. At the time of writing, West Texas Intermediate was trading at $43.25 a barrel, with Brent crude changing hands at $45.94 a barrel, both up by more than 3 percent.

Earlier this week, the International Monetary Fund said it expected crude oil demand to record an 8-percent decline this year. As a result, prices will be 41 percent lower than they were last year on average, the IMF said in a report titled 'Global imbalances and the COVID-19 crisis'.

The IEA meanwhile, updated its oil demand forecast and now expects demand to suffer a 7.9-million-bpd decline this year. This compares with expectations of an 8.9-million-bpd demand contraction by OPEC.

By Irina Slav for Oilprice.com

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