U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Thursday as investors continued to play down the impact of the surge in coronavirus cases on global demand, while focusing more on the tight supply picture.
This notion is being support by comments from ANZ analysts who said in a note, “The (oil inventory) falls suggest the rise in cases of COVID-19s Delta variant is having little impact on mobility.”
US Crude Stockpiles Slide as Imports Fall – EIA
U.S. crude stockpiles last week fell to their lowest since January 2020 as imports and production dropped, the Energy Information Administration said Wednesday and Reuters reported.
Crude inventories fell by 4.1 million barrels to 435.6 million barrels in the week to July 23, more than analysts’ expectations in a Reuters poll for a decrease of 2.9 million barrels.
Gasoline stocks fell by 2.3 million barrels, more than double forecasts for a 916,000-barrel drop.
Distillate stockpiles, which include diesel and heating oil, dropped by 3.1 million barrels, data showed, also exceeding expectations for a 435,000-barrel drop.
Stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures fell by 1.27 million barrels to 35.4 million barrels, also their lowest since January 2020, EIA said. Inventories in the Midwest overall fell to the lowest level since October 2018.
Net U.S. crude imports fell last week by 616,000 barrels per day, while weekly field production fell by 200,000 bpd to 11.2 million bpd.
Refinery crude runs fell by 132,000 bpd, and refinery utilization rates slipped 0.3 percentage points, EIA data showed.
The drop in gasoline and distillate stocks is probably generating the upside momentum on Thursday, which is a good sign for future crude oil demand. So far, we’re not seeing any signs of demand destruction from the new coronavirus outbreak despite what the mainstream media is saying.
There is risk to the demand outlook due to new restrictions, lockdowns and mask mandates around the world, but so far there has been no noticeable impact on demand for fuel. Furthermore, the Federal Reserve even said on Wednesday in its policy statement that the U.S. economic recovery is still on track despite the rise in coronavirus infections.