U.S. crude inventories fell by 4.08 million barrels last week after an unexpected draw of 0.76 million barrels the previous week, according to the latest American Petroleum Institute (API) inventory data for the week ending September 29. Consensus forecasts were for a draw of around 0.9 million barrels for the week.
Gasoline inventories increased for a second week, adding 4.91 million barrels after a 1.47 million barrel build the previous week. The increase far exceeded consensus forecasts of almost 1.0 million barrels. In contrast, distillate inventories registered a draw of 0.58 million barrels after a substantial draw of 4.53 million barrels in the week ending Sept. 22.
The Cushing, Oklahoma, storage hub registered a build of 2.08 million barrels on the week after an increase of 1.06 million barrels previously.
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Inventories are gradually returning to normal following sharp swings during September due to damage from Hurricane Harvey. Refinery use is continuing to recover which will boost fuel supplies and help to underpin crude demand as long as fuel demand holds firm.
Crude prices were confined to narrow ranges on Tuesday with prices still vulnerable to a correction following strong third-quarter gains. Underlying optimism surrounding supply and demand dynamics was also tempered by expectations of a seasonal dip in demand as the U.S. driving season comes to a close. Although West Texas Intermediate (WTI) crude found support above the $50/bbl level, prices closed at two-week lows around $50.40.
From around $50.35/bbl, WTI edged higher after the release, although there was a lack of conviction in the move with prices quickly retreating to just below pre-announcement levels.
Although the headline draw was larger than expected, the sharp build in gasoline stocks had a significant impact in damaging confidence with some concerns over a potential sharper-than-expected seasonal drop in demand.
Wednesday’s EIA inventory release will inevitably trigger choppy trading with data on gasoline, refinery utilization and crude production all having an important impact on sentiment even if the headline release is close to expectations.