Crude oil prices went up today on bullish news from the U.S. Energy Information Administration, which reported a 6.4-million-barrel draw in crude oil inventories and another draw in fuel inventories.
A week earlier, the EIA had estimated a modest 1.3-million-barrel decline in crude oil inventories but a sizeable draw in gasoline pushed prices higher, signaling that strong demand has not wavered amid the latest surge in Covid-19 infections.
For the week to September 10, the EIA reported another draw in gasoline inventories, at 1.9 million. This compared to a draw of 7.2 million barrels a week earlier.
Production of gasoline last week averaged 9.3 million bpd, which compared with 10.1 million bpd a week earlier.
Middle distillate inventories shed 1.7 million barrels in the week to September 10, which compared with a draw of 3.1 million barrels for the previous week.
Production of middle distillates averaged 4.2 million bpd last week, compared with 4.2 million bpd during the previous week.
A day before the EIA reported inventory moves, the American Petroleum Institute had estimated crude oil stocks had shed close to 4 million barrels, pushing prices higher. Since the start of the year, according to API numbers, U.S. crude oil stocks have declined by 70 million barrels.
Meanwhile, production is set to rise as the inventory of drilled but uncompleted wells in the U.S. shale patch declines. This, however, should not be a problem for prices since demand is strengthening, too.
In its latest monthly oil report, the International Energy Agency forecast a 1.6-million-bpd rebound in global oil demand next month as the Delta variant of the coronavirus releases its grip on economies. It would then continue to grow through the rest of the year, the agency said, before beginning to slow down next year.
“The market should shift closer to balance starting from October if OPEC+ continues to unwind production cuts. Even so, it is only by early 2022 that supply will be high enough to allow oil stocks to be replenished,” the IEA said in its report.
This would provide stable support for prices over the next few months, and it is support that will be needed as U.S. shale drillers ramp up along with OPEC+ to offset depletion from legacy wells.