America’s Oil Inventories Could Be Refilled Using Demand Destruction.
US petroleum stockpiles are still at multi-year lows for this time of year, despite record SPR releases, predictions of declining gasoline consumption due to high prices, and a sluggish economy.
In the immediate term, the low levels of commercial crude and product stocks signal to ongoing tight markets for gasoline and diesel, which might boost oil prices.
A drop in demand for gasoline in the U.S. has been cited as a contributing factor in the recent slump in gas prices, which peaked at a record $5 a gallon in the middle of June.
As a result, WTI Crude prices have fallen as a result of this. This week, the differential between the U.S. benchmark and the international Brent Crude benchmark reached its biggest level in almost three years.
While WTI gasoline consumption has decreased, Brent prices have risen as a result of Russia’s ongoing conflict with Ukraine and Western sanctions, including the European Union’s planned embargo on Russian oil.
Crude oil exports from the United States have reached a record high of 4.5 million barrels per day (bpd) in the week ending July 22 as a result of the widest differential between WTI and Brent in three years.
Even if gasoline demand destruction seems to be more severe than previously thought, EIA data indicates that four-week average gasoline demand is still heading higher.
It’s not a guarantee that the lowest US petroleum inventories in years (and for some goods, decades) would override market worries of recession, but it’s a significant optimistic element for oil prices.
The EIA reported that commercial crude oil stocks fell by 4.5 million barrels in the latest reporting week ending July 22. U.S. crude oil stockpiles now stand at 422.1 million barrels, which is roughly 6% lower than the norm for this time of year.
Gasoline stockpiles fell by 3.3 million barrels last week and are now roughly 4% below the five-year average for this time of year, according to the latest data. Stocks of distillates, which include diesel, are now 23% below the seasonal five-year average, making them the most constrained market.
According to statistics collated by Reuters market analyst John Kemp, distillate fuel oil stockpiles, which are most closely tied to the economic cycle, are at their lowest point since 2000.
There has been an abnormally slow increase in distillate inventories so far in the third quarter, with a rise of less than 1 million barrels. Kemp points out that this is one of the smallest distillate inventory increases in the last forty years.