The U.S. Energy Information Administration (EIA) released its weekly inventory report on Wednesday, revealing a larger-than-expected decline in U.S. crude oil stockpiles, the lowest since December 2022. However, the average gasoline demand over the past four weeks hit its lowest seasonal level since 1998. As a result, oil prices plummeted by $5, marking their largest drop in over a year and a five-week low. This weak demand also pushed U.S. gasoline prices down by 6%, reaching a five-month low.
Here's a breakdown of the EIA's inventory data for the week ending September 29:
- Crude oil inventories decreased by 22.24 million barrels, marking the third consecutive week of decline. Analysts had anticipated an increase of 50,000 barrels, compared to the previous week's decrease of 21.69 million barrels.
- WTI crude oil futures' primary delivery location, Cushing, saw an inventory increase of 1.32 million barrels, ending its seven-week declining streak. The previous figure was a decrease of 943,000 barrels. Over the past 14 weeks, Cushing's crude oil inventories declined for 12 weeks, with this being the first increase in eight weeks. Currently, Cushing's crude oil inventory stands at 22.10 million barrels.
- The Strategic Petroleum Reserve (SPR) inventory decreased by 300,000 barrels.
- Gasoline inventories surged by 6.48 million barrels, the largest increase since January 2022. This was higher than the expected increase of 300,000 barrels and the previous week's increase of 1.027 million barrels. The EIA's four-week average for gasoline demand reached its lowest seasonal level since 1998.
- Distillate inventories decreased by 463,000 barrels.
- Additionally, the U.S. imported 3.88 million barrels of crude oil from Canada last week, an increase of 5.93 million barrels from the previous week.
The EIA's inventory report largely aligns with the American Petroleum Institute (API) report released on Tuesday, though there were discrepancies in the magnitude of inventory changes. The API data indicated:
- A decrease of 4.21 million barrels in crude oil inventories for the week ending September 29, compared to the expected decrease of 92,000 barrels and the previous week's increase of 1.586 million barrels.
- Cushing's crude oil inventory increased by 705,000 barrels, compared to the previous week's decrease of 828,000 barrels.
- Gasoline inventories increased by 3.946 million barrels, compared to the expected decrease of 212,000 barrels and the previous week's decrease of 70,000 barrels.
- Distillate inventories increased by 349,000 barrels, compared to the expected decrease of 1.233 million barrels and the previous week's decrease of 1.698 million barrels.
Despite the larger-than-expected decline in crude oil inventories, the lackluster gasoline demand weighed on oil prices.
Financial blog Zerohedge commented that the average gasoline demand over the past four weeks was significantly lower than last year's levels and marked the lowest seasonal level since 1998. Analysts noted that as the economy begins to downturn, there's a significant weakening in crude oil demand. However, current evidence doesn't conclusively support this claim.
On Wednesday, WTI futures for November closed down $5.01, a decline of 5.61%, settling at $84.22 per barrel, marking the largest single-day drop since September of the previous year. Brent futures for December closed down $5.11, a decline of 5.62%, settling at $85.81 per barrel. Both oil benchmarks broke below their 50-day moving averages, signaling a bearish trend.
As previously reported, on October 4, both Saudi Arabia and Russia issued statements saying they would voluntarily cut oil production until the end of the year to maintain market stability. The OPEC+ ministerial meeting suggested maintaining the current policy.
While supply cuts have tightened the market, concerns about the Federal Reserve potentially not halting interest rate hikes, a soaring U.S. dollar making commodities more expensive for most buyers, and a significant rise in U.S. bond yields have all put upward pressure on oil prices in recent trading sessions.
