Analysis by Dr. Nancy Yamaguchi


Crude oil prices bounced back yesterday when official data was released showing another crude inventory drawdown, rather than the industry-predicted stock addition.


The U.S. Energy Information Administration (EIA) released weekly supply data for the week ended July 28. Crude stockpiles shrank for the fifth week in a row, falling by 1.53 million barrels (MMbbls). Previously, the American Petroleum Institute (API) estimated that U.S. crude inventories rose by 1.8 MMbbls last week, and a six-day oil price rally ended.


According to the EIA, U.S. crude inventories declined to 481.9 MMbbls. This was an important milestone, because it was the lowest level of the calendar year. During the first week of January, crude inventories stood at 483.1 MMbbls. The stockpile continued to swell during the first quarter, hitting a peak of 535.5 MMbbls during the last week of March. Since that time, 53.7 MMbbls have been drained from inventory.


The EIA also reported a drawdown of gasoline inventories (2.517 MMbbls) and diesel inventories (0.15 MMbbls), which is helping support product prices.


However, other supply and demand balance indicators continue to point to oversupply. U.S. crude production rose by 20 thousand barrels per day (kbpd), negating last week’s decline of 19 kbpd. Crude production averaged 9,430 kbpd, the highest level in two years.


Apparent demand for gasoline rose by 21 kbpd to an average of 9,842 kbpd for the week—a fresh weekly high. On the other hand, apparent demand for diesel dropped by 236 kbpd on average for the week, bringing demand down to 4,140 kbpd.


West Texas Intermediate (WTI) opened at $49.59 per barrel (/b), up by 79 cents from yesterday’s opening. As of 7:58 a.m. EDT, WTI prices were $49.74/b.