The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories decreased by 2.5 million barrels last week, maintaining a total U.S. commercial crude inventory of 521.8 million barrels. The commercial crude inventory remains at historically high levels for this time of year, according to the EIA.
Wednesday morning, the International Energy Agency (IEA) issued its monthly Oil Market Report. The agency said that “little has changed [month over month] with the market showing an extraordinary transformation from a major surplus in 1Q16 to near-balance in 2Q16.” The IEA noted that commercial inventories rose by 13.5 million barrels in May to close the month at a record global total of 3.07 billion barrels.
Tuesday evening the American Petroleum Institute (API) reported that crude inventories rose by 2.2 million barrels in the week ending July 8. API also reported gasoline supplies increased by 1.5 million barrels and distillate supplies added 2.6 million barrels. For the same period, analysts had estimated a decrease of around 2.95 million barrels in crude inventories along with a decline of 432,000 barrels in gasoline supplies and a 256,000-barrel increase in distillates.
Total gasoline inventories increased by 1.2 million barrels last week, according to the EIA, and remain well above the upper limit of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged over 9.7 million barrels a day for the past four weeks, up by 1.6% compared with the same period a year ago.
The combined effect of the API inventory report and the IEA monthly report was to push crude prices down. The EIA-reported drop in crude supplies is more than outweighed by the addition to the gasoline stockpile.
Refiners were taking some lumps Wednesday morning as well before the EIA report and are likely to get hit harder on the increased supply of motor gasoline. The IEA’s report also contained cautionary words about refining as the market rebalances:
In mid-summer 2016, although market balance is upon us, the existence of very high oil stocks is a threat to the recent stability of oil prices: in 1Q16 refinery runs growth was 60% higher than refined product demand growth. Despite the regular upwards revisions to demand that we have seen in recent Reports there are signs that momentum is easing; and, although stocks are close to topping out, they are at such elevated levels, especially for products for which demand growth is slackening, that they remain a major dampener on oil prices. With global refinery runs expected to fall by 0.8 mb/d in 2Q16 before surging by 2.4 mb/d in 3Q16, we may well see crude oil stocks fall back but there is a risk that, unless demand turns out to be stronger than we currently anticipate, products stocks could rise still further and threaten the whole price structure.
Before the EIA report, benchmark West Texas Intermediate (WTI) crude for August delivery traded down about 1.2% at around $47.25 a barrel and dropped to around $45.68 shortly after the report’s release. WTI crude settled at $46.80 on Tuesday. The 52-week range on August futures is $32.22 to $56.51.