Oil Gains After Stockpiles Show Larger-Than-Expected Drop

Crude inventories fell by 7.2 million barrels in the week to July 21, a far deeper draw than the decrease of 2.6 million barrels analysts had forecast.

That brought US inventories down to 483.4 million bbl, still well above the five-year average but down almost 10% from their peak in late March. Gasoline stockpiles also fell by 1 million barrels, while distillate stockpiles lost 1.9 million barrels last week, according to the EIA.

West Texas Intermediate for September delivery rose as much as 70 cents to $48.59 a barrel on the New York Mercantile Exchange, and was at $48.36 as of 8:48 a.m. local time. In the prior week, USA oil stockpiles dropped sharply but production rose to the highest level since late July 2015.

Oil prices rose sharply on Wednesday after US government data showed crude and fuel inventories fell more than expected, reinforcing expectations that the long-oversupplied market was moving toward balance.

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Kuwait joined the United Arab Emirates in promising to pump less oil after Saudi Arabia called on fellow OPEC producers to cut more supply to help curb the global glut. Exports, meanwhile, surged to more than 1 million bpd.

Donald Morton, senior vice president at Herbert J. Sims & Co., who runs an energy-trading desk, said prices of different grades of oil around the world are moving closer together - another sign of an increasingly tight market. While U.S. crude stockpiles continue to decline during a period of strong seasonal demand, they remain about 100 million barrels above the five-year average.

The estimates of the Sinopec executive for the increased full-year 2017 imports come despite reports that Chinese refineries are expected to shut almost 10 percent of the country's 15.1-million-bpd refinery capacity in the third quarter-the peak demand season, as they continue to grapple with domestic surplus of gasoline and diesel. If that release shows a similar decline to API, prices will rise even more, said Michael McCarthy, an analyst at CMC Markets.

  • Ronnie Bowen