Recent data from the Energy Information Administration (EIA) reveals a significant decline in commercial crude oil inventories in the United States, falling by 1.6 million barrels to reach 417.5 million barrels for the week ending last Friday. This decrease was notably larger than the anticipated reduction of 100,000 barrels, as per a Bloomberg poll, and positions current inventory levels 4% below the five-year average for this time of year.
Meanwhile, motor gasoline and distillate fuel stocks have each experienced an uptick of 100,000 barrels. Additionally, inventories of propane and propylene surged by 2.3 million barrels, contributing to an overall rise in total commercial petroleum inventories of 3.4 million barrels for the week. Regarding refinery activity, crude-oil inputs averaged 16.5 million barrels per day, marking a decline of 283,000 barrels from the previous week's averages.
The refineries' operational capacity decreased slightly to 92.1%, down from 92.8% recorded in the previous week. Gasoline production shows a downward trend, dropping from 9.4 million barrels per day last week to 9.7 million barrels per day. Similarly, the output of distillate fuel dipped to 5.1 million barrels per day from 5.2 million barrels in the prior week.
In terms of market prices, West Texas Intermediate crude oil remained relatively unchanged at $69.89 per barrel, despite the Federal Reserve's decision to cut interest rates by 50 basis points. On the other hand, Brent crude was flat at $73.70. The oil market's dynamics are currently in focus, as crude prices have rebounded from previous lows, attributed primarily to what is referred to as 'short covering'.
However, the outlook remains cloudy as the potential for Brent to breach the significant resistance level of $75 is hindered by persistently weak refinery margins globally, indicating sluggish demand. This sentiment was echoed by Saxo Bank in their note released on Wednesday, highlighting the ongoing challenges facing the crude market..