Data from the U.S. Energy Information Administration (EIA) show U.S. crude oil inventories unexpectedly dropped by 12.456 million barrels last week, the largest decline since November last year, compared to an expected increase of 2 million barrels. Stocks of gasoline and distillates also came in significantly below expectations. WTI crude futures briefly increased by about $0.70, reaching a high of $74.66, widening the overall daily gain to 2.4%.
The specific EIA data for the week of May 19 in the U.S. are as follows:
Crude oil inventories unexpectedly fell by 12.456 million barrels, compared to an expected increase of 2 million barrels, and a previous value increase of 5.04 million barrels.
The U.S. Strategic Petroleum Reserve (SPR) fell for the eighth consecutive week, with the latest weekly decline standing at 1.6 million barrels.
Crude oil inventories in Cushing, Oklahoma, the delivery point for WTI, increased by 1.762 million barrels, compared to a previous increase of 1.461 million barrels. The Gulf Coast of the United States saw a record drop in crude oil inventories.
Gasoline inventories decreased by 2.053 million barrels, compared to an expected decrease of 1.6 million barrels and a previous decrease of 1.381 million barrels.
Distillate inventories decreased by 561,000 barrels, compared to an expected increase of 500,000 barrels and a previous increase of 80,000 barrels.
Refinery utilization rate change was -0.3%, compared to an expected 0.6% and a previous value of 1%.
Currently, U.S. gasoline inventories are at their lowest levels since 2014 for this time of the year. U.S. distillate inventories have dropped to their lowest since May 2022 and their lowest seasonal levels since 2005, with Midwest distillate inventories at their lowest since December 2020.
The EIA's latest inventory report largely aligns with the previous day's API report showing a significant decline in crude oil and gasoline inventories. The EIA reported a larger decline in crude oil inventories, while the API reported a more significant drop in gasoline stocks.
At a time of low inventories, U.S. crude drilling activity might indicate tightening future oil output, leading to supply-side stress. Oilfield service company Baker Hughes reported on Friday that the number of active drilling rigs in the U.S. fell by 11 from the previous week to 720, an 8-rig year-on-year decrease. This is the first annual decrease since April 2021. The ongoing decline in drilling activity could result in a decline in U.S. crude output in the coming months, especially in shale production. It might be challenging to surpass the record production peak before the COVID-19 pandemic in the short term.
On Wednesday, oil prices continued their gains from Tuesday. After the EIA data were released, oil prices extended their gains to over 2%. The gains slightly receded afterward.
Recently, apart from being bolstered by inventory data, statements from Saudi Arabia have also significantly supported oil prices. On Tuesday of this week, Saudi Arabia warned that oil short-sellers should "be careful," and they would continue to feel the pain. With just about a week left until the OPEC+ meeting in June, Saudi Arabia's warning has ignited expectations for OPEC+ to cut production to stabilize oil prices.
Market observers point out that traders are betting on an economic downturn that could hurt oil demand, with a significant amount of speculative short positions in the market, which is why OPEC wants to actively cut production. OPEC+ has unexpectedly reduced in early April, and if necessary, they may intervene again in June.
Data from the U.S. Commodity Futures Trading Commission (CFTC) last Friday showed that in the week ending May 16, speculators decreased their net long positions in Brent and WTI crude oil by 17,601 contracts to 250,448 contracts, a new low for the past eight weeks. The net long positions in WTI crude fell by 11,632 contracts to 160,293 contracts. The net long positions in NYMEX gasoline increased to 44,542 contracts.
As for future oil price trends, analysts point out that oil prices have been under pressure from non-commercial bearish trading positions, but positive demand signals or additional production cuts by OPEC+ could cause crude oil prices to soar. The deadlock in U.S. debt ceiling negotiations and inflation concerns create uncertainty about oil demand, but robust gasoline consumption supports the physical oil market.