Brent crude futures topped $75 on Thursday morning as U.S. crude oil inventories fell to 7 percent below the five-year average, according to EIA data.
The rise in crude oil prices comes despite oil demand concerns on the back of mounting fears regarding Covid-19’s Delta variant and disappointing news of waning efficacy of the Pfizer jab after six months.
The decreasing inventories and steady-as-she-goes U.S. oil production is assuaging the fears that production increases will outpace demand increases. On the contrary, U.S. oil production has failed to make any meaningful gains over the last seven months. In December, oil production averaged roughly 11 million bpd, while July’s production has come within 200,000-400,000 bpd of that figure.
Meanwhile, oil inventories have continued to draw down during that time, shedding between 55 million and 68 million barrels total, depending on whether API or EIA data is used.
The data inspires confidence. Not necessarily that oil demand is roaring back, but that it is outpacing U.S. production. But that’s not to say that sunny days are here to stay.
Fluid Covid-19 developments, a possible uptick in oil supplies from Iran and Venezuela as sanctions are potentially reconsidered, and OPEC’s production plans all have a strong pull on oil prices.
Inventory and rig data, particularly in the United States, will continue to have a powerful effect on the markets. All eyes now will be on Friday’s rig count provided by Baker Hughes as well as Primary Vision’s Frac Spread count. When combined, the two data sets can give a look ahead at future U.S. oil production and the overall sentiment presiding over the U.S. oil industry.
By Julianne Geiger for Oilprice.com
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