Crude oil prices increased today after the U.S. Energy Information Administration (EIA) reported a significant drop in oil inventories for the week ending August 16.
According to the EIA, inventories decreased by 4.6 million barrels, contrasting with a surprise increase of 1.4 million barrels reported last week. On Tuesday, the American Petroleum Institute (API) had reported a smaller, unexpected inventory rise of 347,000 barrels.
The EIA also reported declines in fuel inventories. Gasoline stocks fell by 1.6 million barrels during the same period, compared to a 2.9 million-barrel drop the previous week. Gasoline production averaged 9.8 million barrels per day last week, up slightly from 9.7 million barrels daily the week before.
In middle distillates, inventories dropped by 3.3 million barrels, compared to a 1.7 million-barrel decline the previous week. Production of middle distillates averaged 4.9 million barrels per day last week, an increase from 4.8 million barrels daily the prior week.
Despite these inventory declines, oil prices remain subdued. The API’s inventory report, while contributing to the overall market sentiment, had a modest impact. Concerns about a potential ceasefire in the Middle East, which could reduce supply disruption risks, and ongoing perceptions of weak Chinese demand are also affecting oil prices.
ING analysts noted that while weak Chinese demand has been widely reported, refinery margins worldwide have been under pressure throughout August. This suggests that the demand issues are not limited to China alone. They cautioned that oil prices might face further declines.
Conversely, Commonwealth Bank of Australia analyst Vivek Dhar indicated that any decrease in oil prices due to a potential Gaza truce is likely to be temporary. He suggested that the likelihood of a ceasefire agreement between Israel and Hamas remains low.