Oil inched higher after the EIA reported strong crude inventories

Crude oil prices dipped shortly before the EIA reported its crude stockpiles report today, but rebounded slightly after the release, when the agency said crude inventories added 5.5 million barrels in the week to Aug. 5.

A week earlier, inventories added 4.5 million barrels, according to the EIA, adding to pressure on prices.

For fuels, the picture was mixed.

Gasoline inventories fell by 5 million barrels in the week to August 5, compared with a modest increase of 200,000 barrels in the previous week.

Gasoline production rose to an average of 10.2 million barrels a day last week, compared with 9.3 million barrels a day a week earlier.

With middle distillates falling to critical levels this year, the EIA estimated a 2.2 million barrel increase in inventories for the week to August 5. That compares with a decline of 2.4 million barrels in the previous week.

Middle distillate production averaged 5.1 million barrels per day last week, compared with 4.9 million barrels per day the previous week.

U.S. distillate stockpiles have fallen to dangerously low levels, and from that point on, Reuters’ John Kemp wrote last week, “either a looming recession dampens consumption or prices are likely to rise.”

Neither is a very tangible option for the Biden administration, which has boasted of a steady decline over the past few weeks. According to EIA data cited by Kemp, distillate fuels have declined in 66 of the past 109 weeks, with total consumption since July 2020 at 65 million barrels.

Against this backdrop, signs are emerging that US manufacturing activity may be set to decline in the second half of this year after peaking in the second quarter, according to a Reuters market analyst.

Meanwhile, refineries continued to operate at high rates, averaging 94.3 percent of capacity last week. Refineries process an average of 16.6 million barrels of crude oil per day. That compared with 15.9 million barrels per day for the previous week, with capacity utilization at 91 percent.

By Irina Slav for Oilprice.com

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