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Significant Draw In Crude Inventories Jolts Oil Prices

Shale oil

A day after the American Petroleum Institute lifted spirits with an estimated crude oil inventory draw of 8.133 million barrels, the Energy Information Administration added to the optimism by reporting a decline in inventories of 7.6 million barrels for the week to July 7.

At 495.4 million barrels, the EIA said, U.S. commercial inventories were within the upper half of the average range for the season. Analysts had expected a draw of about 3 million barrels for last week, possibly emboldened in their expectations by the previous week’s draw, which the EIA calculated at 6.3 million barrels.

Gasoline inventories, according to the EIA, fell by 1.6 million barrels last week, after a 3.7-million-barrel decline in the week to June 30 that helped boost prices. Daily gasoline production averaged 10.5 million barrels, with refineries operating at 94.5 percent of capacity and processing 17.2 million barrels of crude.

Oil prices have been doing well since the start of this week. A 2018 production rise revision from the EIA has added to optimism fueled by reports that OPEC will ask Libya and Nigeria to join its production-cutting efforts aimed at propping up prices. The two countries were exempted from a deal struck with Russia and 11 other producers last year that set to remove 1.8 million barrels from daily global supply. Related: Strong Demand Expectations To Lift Oil Prices

The EIA said yesterday that in 2018, crude oil production will hit 9.9 million barrels daily, up from the 9.3 million bpd forecast for this year.

The good mood was reinforced by a senior Halliburton executive who said yesterday that the oilfield services industry is currently experiencing unsustainable levels of demand from oil producers in the shale patch, and this will slow down production growth next year.

On the other hand, Goldman Sachs analysts were the latest to warn that oil prices could dive below US$40 a barrel, unless a “shock and awe” event stimulates buying. One of these “shock and awes” could be a drop in U.S. inventories, despite the fact that the recent inventory draws, however substantial, failed to move prices much higher.

By Irina Slav for Oilprice.com

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