Oil Jumps On Massive Crude Inventory Draw

Crude oil prices moved higher today, after the Energy Information Administration estimated a draw in oil inventories of 7.1 million barrels for the week to August 12.

This compared with a build of 5.5 million barrels reported for the previous week. A day earlier, the American Petroleum Institute estimated a modest crude draw of 448,000 barrels for the week to August 12.

In gasoline, the EIA estimated an inventory draw of 4.6 million barrels for last week, which compared with a 5-million-barrel decline for the previous week.

Gasoline production averaged 10 million bpd last week, which compared with 10.2 million bpd during the previous week.

In middle distillates, the EIA reported an inventory build of 800,000 barrels, which compared with a much needed build of 2.2 million barrels for the previous week as inventories have fallen to critical levels.

Middle distillate production averaged 5.1 million barrels daily, compared with 5.1 million bpd for the previous week.

Oil prices hit the lowest in six months earlier this week but recovered after the API report as it suggested demand for oil remained stable despite the challenging economic situation.

At the time of writing, Brent crude was trading at $92.47 per barrel, with West Texas Intermediate changing hands for $87.01 per barrel.

“A drawdown of U.S. gasoline stockpiles for a second straight week has reassured investors that demand is resilient, prompting buys,” one oil analyst from Fujitomi Securities told Reuters this week.

“Still, the oil market is expected to stay under pressure, with fairly high volatility, due to worries over a potential global recession,” Kazuhiko Saito added.

The volatility is being fed also by continued uncertainty about the Iran nuclear deal, after Iran sent a written response to the EU’s latest proposal with Iranian media suggesting it won’t accept it as is.

Another factor fuelling price volatility are the latest oil demand figures from China, which were weaker than many expected.