Oil Rebounds On Surprise Crude Inventory Draw

A week after it reported a sizeable oil inventory build that pushed prices lower for a while, the EIA today said crude oil had last week shed 400,000 barrels.

At 426.5 million barrels, inventories remain below the five-year average for this time of the year.

Gasoline inventories were down last week, by a sizeable 5.4 million barrels. This compared with a draw of 2 million barrels for the previous week.

Gasoline production last week averaged 10.1 million bpd, which compared with 9.6 million bpd a week earlier.

In middle distillates, the EIA estimated an inventory decline of 3.9 million barrels. This compared with a flat week-on-week inventory situation for the seven days to October 8.

Middle distillate production averaged 4.4 million bpd last week. This compared with 4.7 million bpd for the previous week.

Meanwhile, the now global energy crunch continued to support prices. Since the start of September, Brent crude has gained almost 20 percent, according to Reuters, while West Texas Intermediate has added 21 percent.

"Supply-demand balances show that the market is experiencing a supply deficit, which is spurring deep inventory draws and driving prices upwards," Louise Dickson, senior oil markets analyst at Rystad Energy, told Reuters.

"This market tightness is expected to extend into most of 2022, and crude oil supply will only catch up with crude demand by the fourth quarter of next year."

This has prompted a revision of peak oil demand forecasts, with the International Energy Agency earlier this month warning more investment in new oil production was necessary to avoid more energy crunches.

This week, a drop in temperatures in China added fuel to the oil price rally, as the first sign of a coming test of the country's preparedness for winter. China has been gobbling up coal, oil, and gas in anticipation of the cold season, moving all fossil fuel prices higher.

At the time of writing, Brent crude was trading at $84.09 a barrel, with WTI at $82.02 a barrel.

By Irina for Oilprice.com

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