Crude oil inventories fell by an unexpectedly sharp 6.3 million barrels in the June 30 week to 502.9 million, 1.9 percent above the year ago level. Product inventories also fell, with gasoline down 3.7 million barrels to 237.3 million, 0.7 percent below last year at this time, while distillates fell 1.9 million barrels to 150.4 million, 1.0 percent above the level last year. Most analysts expected a much smaller crude oil drawdown for the week of around 2 million barrels, even after the American Petroleum Institute, a private industry group, reported a similarly large decline of 5.8 million barrels in crude oil inventories for the week in its own report yesterday afternoon. WTI crude oil prices rose about 60 cents to around $46.30 per barrel immediately following the release of the EIA report.
Crude oil imports fell 274,000 barrels per day in the week to an average of 7.7 million barrels per day. Over the last four week weeks, crude oil imports averaged 7.9 million barrels, down 1.0 percent from the same period last year.
Refineries operated at 93.6 percent of their operable capacity during the week, up 1.1 percentage points from the previous week, pushing up the production of gasoline to an average of 10.4 million barrels per day, but production of distillates nevertheless fell to an average of 5.1 million barrels per day.
Product demand is on the upswing, with total product supplied over the last four weeks averaging 20.6 million barrels per day, pulling the year-on-year comparison up from negative territory to a plus 0.5 percent. Motor gasoline products supplied averaged 9.6 million barrels per day, down 1.8 percent from the same period last year, but distillate fuel supplied is up 5.8 percent year-on-year, averaging 4.1 million barrels per day.
The sizable drawdowns together with a demand side that is now slightly up year-on-year is welcome news to producers worried about an oversupplied market as new U.S. domestic oil production offsets OPEC output cuts, and should give further support to crude oil prices that have already rebounded about 10 percent after a brief dip below $42.50 per barrel in mid-June.