U.S. crude stocks fell sharply last week due to strong refining activity and an increase in exports, while gasoline and distillate inventories also dropped more than expected, the Energy Information Administration (EIA) said July 26.
Crude inventories fell by 7.2 million barrels (bbl) in the week to July 21, a far deeper draw than the decrease of 2.6 million bbl analysts had forecast.
That brought U.S. inventories down to 483.4 million bbl, still well above the five-year average but down nearly 10% from their peak in late March. Oil futures rallied on the EIA report and then retraced some gains, with Brent remaining above $50/bbl.
Gasoline stocks fell by 1 million bbl, compared with analyst expectations for a 614,000-bbl drop. Gasoline demand is still down 0.3% for the past four weeks from the year-ago period.
"Overall, this report gives the bulls some solid fundamentals to build on," said David Thompson, executive vice president at Powerhouse, an energy-specialized commodities broker in Washington, D.C.
Falling U.S. inventories in recent weeks have helped alleviate some concerns about the global crude glut as Saudi Arabia and Russia, the world's largest producers of crude, underscored their commitment to reducing crude supply and demanded the same of other producing nations.
West Texas Intermediate crude futures were up 29 cents to $48.17/bbl as of 10:03 a.m. CDT (15:03 GMT) after hitting a high of $48.87/bbl, while Brent crude rose 18 cents to $50.40/bbl, retreating from a session high of $51.06/bbl.
Analysts have wondered whether the tightening of supplies can be chalked up to seasonal factors or whether prices will continue to rise as OPEC continues to limit production.
"Today’s report has strengthened the bullish sentiment already prevailing in the market, although the longevity of the move remains in doubt," said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics in London.
Distillate stockpiles, which include diesel and heating oil, fell by 1.9 million bbl, vs. expectations for a 453,000-bbl drop, the EIA said.
Crude stocks at the Cushing, Okla., delivery hub fell by 1.7 million bbl, the EIA said.
Refinery crude runs rose by 166,000 bbl/d, EIA data showed. Refinery utilization rates rose by 0.3 percentage points to 94.3% of their capacity.
U.S. crude imports fell last week by 254,000 bbl/d. Exports, meanwhile, surged to more than 1 million bbl/d.
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