This week’s EIA data surprised with a 6.5mmbbl WoW crude inventory drawdown, significantly greater than market expectations, easing inventory down to
Implied all product demand rose marginally, up 0.1mmb/d (+0.4%) WoW, with gains in implied demand for distillate and residual fuel largely a wash with the drop in demand for 'other oil products' (-0.9mmb/d, -21.6% WoW), which more than reversed last week’s gains. Gasoline demand registered a 0.2mmb/d (+1.8%) WoW increase but remains very weak — well below the historical range. Adding further pressure to demand, gasoline prices have now risen above the psychologically significant USD 3.50/US gallon.
Despite the significantly larger than expected inventory draws, crude remains bloated and product ample against a background of continuing weak US demand. Estimates of OPEC’s July production are likely to become more widely available into next week and, though initial indications are that total OPEC production fell, it still looks likely to be well in excess of demand with Saudi production showing no sign of being reduced from the 10mmb/d level.