Crude oil prices rose yesterday after the EIA’s weekly inventory report was positive. U.S. commercial crude oil inventories fell by 3.44 million barrels last week, surpassing the 1.92 million barrel decline reported by API the previous day. This larger-than-expected decline came despite crude oil exports falling by 402k b/d week-over-week and imports rising by 213k b/d. This was likely partially offset by stronger refinery activity this week. Refineries increased their run rates by 1.9 percentage points, which led to an increase in refinery inputs of 317k b/d week-over-week. Gasoline inventories also fell by 2 million barrels, while distillate inventories rose by 4.88 million barrels. Implied demand for refined products fell by 334k b/d week-over-week. However, the four-week average gasoline demand continued to trend upward, increasing by 89,000 b/d to 9.29 million b/d, surpassing 2023 levels for the first time since March. This should ease some concerns about U.S. gasoline demand as the U.S. driving season deepens.
The US Department of Energy has announced a notice to purchase an additional 4.5 million barrels of US sour crude oil for the Strategic Petroleum Reserve for delivery in October, November and December at a price not to exceed $79.99 per barrel. Prices have recently traded above this level, but the futures curve is inverted, with November and December WTI contracts trading below $80 per barrel.
OPEC released its latest monthly oil market report yesterday, with little change in the balance. OPEC continues to maintain its aggressive demand growth forecast, expecting demand to grow by 2.25 million b/d year-on-year in 2024 and a further 1.85 million b/d in 2025. Non-OPEC+ supply growth was also left unchanged at 1.23 million b/d in 2024 and 1.1 million b/d in 2025. OPEC crude oil production averaged 26.57 million b/d in June, down 80,000 b/d month-on-month. The decline was mainly driven by Saudi Arabia and Iraq. Meanwhile, OPEC+ (including Russia and others) production in June fell 125,000 b/d month-on-month to 40.8 million b/d. The main driver of the decline was Russia, whose production fell 114,000 b/d month-on-month to 9.14 million b/d. The IEA is due to release its latest monthly oil market report later today.
European natural gas prices remain under pressure as supply concerns ease. With European storage at 80% full, we maintain our bearish view on TTF through Q3. The latest positioning data also shows that investment funds reduced their net longs in TTF by 3.2 TWh to 143.4 TWh in the week prior to the report. However, funds still hold significant net longs in TTF, which we believe is at odds with more bearish fundamentals.
