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Huge Crude Draw Fuels Oil Price Rally

A day after the American Petroleum Institute reported a stunning crude oil inventory draw of over 10 million barrels continuing a string of weekly declines, the Energy Information Administration released its own weekly estimate, which confirmed the size of the draw, strengthening oil prices further.

According to the EIA, U.S. crude oil inventories shed 10.8 million barrels in the week to July 19. This follows an estimated inventory draw of 3.1 million barrels for the previous week. Analysts had expected the EIA to report an inventory draw of 6.33 million barrels.

Gasoline inventories fell by 200,000 barrels last week, versus a jump of 3.6 million barrels in the previous week. Gasoline production, the EIA said, averaged 10.1 million bpd last week, up from 9.9 million bpd a week earlier.

In distillate fuel, the authority reported an inventory increase of 600,000 barrels. A week earlier, distillate fuel inventories added a substantial 5.7 million barrels. Production last week averaged 5.2 million barrels daily, versus 5.4 million bpd a week earlier.

Refineries processed 17 million bpd in the seven days to July 19, down from 17.3 million bpd processed on average in the previous week.

The API’s report yesterday helped push prices higher as the draw it had estimated beat analyst expectations after the huge 10-million-barrel draw the API had reported last week. EIA’s figures from today will without a doubt strengthen the rally as the latest developments in U.S.-Iranian relations constitute the mixed signals that the oil market loves to hate.

While these relations remain tense—and tend to be getting tenser after the U.S. Navy shot down an Iranian drone over the Strait of Hormuz—reports of pending negotiations have relieved some of that pressure, sending oil prices lower.

At the time of writing, Brent crude traded at US$63.96 a barrel with West Texas Intermediate at US$56.97 a barrel, both moderately up since trade opened.

By Irina Slav for Oilprice.com

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