Crude oil prices fell today, even after the Energy Information Administration (EIA) reported a notable decrease in inventories. For the week ending September 20, crude oil inventories dropped by 4.5 million barrels.
Inventory Changes Overview
This decline stands in stark contrast to the previous week’s inventory drop of 1.6 million barrels. Prior to that, there had been a slight build of less than 1 million barrels, which had already exerted downward pressure on prices.
The recent inventory change also revealed reductions in fuel stocks. Gasoline inventories decreased by 1.5 million barrels during the reporting period. Gasoline production averaged 9.8 million barrels per day last week, an increase from the previous week’s production of 9.7 million barrels, which saw a minor inventory build of around 100,000 barrels.
In the middle distillates category, the EIA estimated a draw of 2.2 million barrels for last week, with production averaging 4.9 million barrels per day. This marks a shift from the previous week, which experienced a 100,000-barrel inventory increase and a production rate of 5.1 million barrels daily.
Market Reactions
Despite the positive inventory news, oil prices continued to decline today. Initial optimism about economic stimulus in China quickly dissipated. This sentiment was replaced by ongoing concerns about demand from the world’s largest oil importer. After the stimulus announcement, oil benchmarks initially rose by nearly 2%, but those gains were short-lived.
On a positive note, the American Petroleum Institute (API) released its weekly inventory report, indicating a larger-than-expected decline in crude oil inventories of 4.34 million barrels for the week ending September 20. This report added some bullish sentiment to the market.
Additionally, concerns over a storm in the Gulf of Mexico provided temporary support for oil prices. The storm may disrupt normal operations in the region, prompting some companies to shut down production of crude oil and natural gas in anticipation.
OPEC’s Long-Term Outlook
OPEC’s recent report, the World Oil Outlook, also conveyed a positive message for the market. The cartel revised its long-term oil demand projections, stating that global demand is expected to exceed 120 million barrels per day by 2050. This growth is primarily driven by strong demand from non-OECD countries, which OPEC predicts will see the majority of this increase.
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