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Surprise Crude Inventory Build Forces Oil Prices Lower

Crude oil prices moved lower today after the Energy Information Administration reported an inventory build of 3.6 million barrels for the week to July 30.

This compared with analyst expectations of a 2.9-million-barrel draw. For the previous week, the EIA had estimated an inventory draw of 4.1 million barrels.

The EIA also reported an estimated 5.3-million-barrel draw in gasoline stocks for the week to July 30, which compared with a decline of 2.3 million barrels for the previous week.

Gasoline production averaged 10.2 million barrels daily last week, compared with 9.8 million bpd a week earlier.

In middle distillates, the EIA reported an inventory increase of 800,000 barrels for the last week of July. This compared with a draw of 3.1 million barrels for the previous week.

Production of middle distillates stood at 4.9 million bpd last week, which compared with 4.7 million bpd the previous week.

Oil prices have been trending down over the last couple of days, with rising concern about the spread of the latest coronavirus variant fueling worries about the immediate demand outlook. At the same time, the API yesterday reported a smaller than expected draw in inventories, which also pressured prices.

On the other hand, however, reports of a tanker hijacking in the Gulf of Oman are adding upward pressure to prices as the reports again point to Iran as the culprit, increasing the uncertainty around the nuclear deal Tehran is negotiating with Western powers.

No deal would mean no additional Iranian barrels coming to international markets—at least not legally—which in turn means that supply will remain constrained by the OPEC+ deal. The deal envisages additions of 400,000 bpd every month beginning this month until it returns to pre-deal production levels, which should happen by September next year.

At the time of writing, Brent crude was trading at $71.22 a barrel, with West Texas Intermediate at $69.07 a barrel, both down from opening, as pandemic worry weighed on demand expectations.

By Irina Slav for Oilprice.com

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Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More