In recent reports regarding the United States' crude oil inventory trends, data has illustrated a significant draw that exceeds market expectations. According to the latest release from the Energy Information Administration (EIA), commercial crude stockpiles, excluding the strategic petroleum reserve, have decreased by an impressive 6.9 million barrels, bringing the total inventory down to 418.3 million barrels for the week concluding last Friday.
Market analysts had anticipated a modest reduction of 300,000 barrels, indicating a larger than expected contraction in supply. This figure also reflects an inventory level that stands approximately 5% below the five-year average for this period, suggesting tightening supply conditions. In addition to crude oil, the report revealed a decrease in distillate fuel stocks, which fell by 400,000 barrels during the same week.
However, the inventory of propane and propylene witnessed a notable increase of 2.6 million barrels, while there was an uptick in total motor gasoline inventories, which rose by 800,000 barrels. Across the board, total commercial petroleum inventories experienced a decline of 8 million barrels last week, signaling a tightening market that may influence future pricing strategies. Refinery operations also showed resilience, with crude-oil refiners averaging inputs of 16.9 million barrels per day, marking an increase of 36,000 barrels from the previous week’s average.
Refineries maintained operations at 93.3% of their capacity, demonstrating a steady commitment to meet refinable product demands despite fluctuating inventories. In the production spectrum, gasoline output has ascended to 9.7 million barrels per day, compared to 9.6 million barrels the week before.
Meanwhile, distillate fuel production has also risen, reaching 5.2 million barrels per day, up from 5 million barrels. As of late Thursday, West Texas Intermediate crude oil prices remained stable, priced at $69.20 per barrel, while Brent crude prices held steady at $72.73. Despite this stability, underlying concerns regarding demand dynamics and potential supply surpluses leading into 2025 continue to cast a shadow over market sentiment. Warren Patterson, Head of Commodities Strategy at ING, noted in a recent commentary that “demand concerns and prospects for a supply surplus in 2025 have weighed on oil prices.” He elaborated that ING has revised its forecast for Brent crude in the fourth quarter, lowering the estimate from $84 to $80 per barrel, primarily driven by weaker demand signals emerging from China. Looking ahead, the Organization of the Petroleum Exporting Countries (OPEC) and its allies are expected to commence a gradual rollback of additional voluntary production cuts starting in October 2024 and continuing through September 2025.
Patterson indicated, however, that ongoing demand concerns, coupled with Brent trading below the $80 per barrel threshold, might necessitate a reconsideration of these plans for increasing supply. Interestingly, a prolonged dispute in Libya may provide an opportunity for OPEC+ to enhance supply levels, potentially shifting the balance in market dynamics..