Crude Oil Pressured Early by Increase in API Cushing Inventories

Oil prices tumbled 3 per cent on Wednesday, with US crude futures hitting three-month lows, as USA crude and gasoline stocks surged on weak demand during the peak summer driving season.

With the weekly increase in crude and gasoline inventories, fears about the glut of supply in global markets have revived, pushing oil prices down more than 2 percent.

Domestic crude production rose modestly by 21,000 barrels per day (bpd) to 8.51 million, but oil imports jumped 303,000 bpd to reach 8.44 million, according to the EIA.

The US Energy Information Administration said US oil stocks swelled by 1.7m barrels in the week to 22 July, compared to analysts’ expectations for a decrease of 2.3m barrels. The contract dropped 0.5 percent to $42.92 on Tuesday, the lowest close since April 25. Analysts had expected gasoline inventories to have increased by 675,000 barrels in the reporting period and distillate fuel stockpiles to have gained 700,000 barrels. Total volume traded Wednesday was about 31 percent below the 100-day average.

Despite concerns, gasoline inventory levels are still within the five-year range and just a few days above normal on a days-supplied basis when factoring in the current higher level of overall demand. West Texas Intermediate (WTI) crude for September was down $0.06 or -0.14% at $42.86.

On Tuesday, the largest independent USA refiner Valero Energy Corp VLO.N said it expected lower refinery utilization over the rest of the year to counter slumping margins caused by record supplies of gasoline and diesel products.

WTI was trading at US$43.16 a barrel shortly before the EIA release, up from US$42.76 at the time of release of the API figures, and Brent crude was changing hands at US$44.86 a barrel, up modestly from US$44.58 yesterday. “Clearly Asian demand has slowed, but, offsetting that, the situation in Nigeria is worse today than at any other point”.