Oil Jumps as U.S Inventories Shrink for Second Straight Week

Oil Jumps as U.S Inventories Shrink for Second Straight Week

Oil jumps Thursday as United States (U.S) Inventories decreased for the second straight week, prompting a possible increase in crude prices during summer. Brent price jumped to near $72 a barrel and WTI reached a 2-year-high level, boosted by the estimates that the demand will recover in the second half of the year and by robust recovery signals especially from the US, Europe, and China.

Traders’ oil charts showed that international benchmark Brent crude was trading at $71.71 per barrel, up 0.50% after closing Wednesday at $71.35 a barrel. Also, American benchmark West Texas Intermediate (WTI) hit $69.14 a barrel at the same time, jumped 0.45% after ending the previous session at $68.83 per barrel. According to oil market data, this is the highest level since October 18, 2018, when it traded at $70.03.

Inventories of commercial crude in the US declined for the second consecutive week but oil prices are expected to rise during the summer amid strong demand. Oil stockpiles fell by 5.1 million barrels to 479.3 million barrels in the week ended May 28, the Energy Information Administration said on Thursday.

Supplies were about 3% lower than the five-year average for this time of year. A week earlier, inventories slid 1.7 million barrels. Oil market analysts had expected a supply decrease of 2.4 million barrels, according to Investing.com.

West Texas Intermediate crude futures slipped about 0.2% to about $69 a barrel and Brent dipped about 0.3% to $71 a barrel on Thursday.

The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday confirmed a gradual increase in oil supply by returning 2.1 million barrels per day to the market through July, according to media reports.

The EIA said gasoline supplies rose by 1.5 million barrels but were still 3% lower than the five-year average for this time of year. A week earlier, gasoline inventories declined 1.7 million barrels. Distillate fuel inventories increased by 3.7 million barrels but about 8% below their five-year average.

Crude imports dropped by 600,000 barrels per day last week to an average of 5.6 million barrels. Imports averaged about 6 million barrels a day over the past four weeks, 0.7% below the prior-year print. Gasoline production averaged 9.6 million barrels a day, down from 9.7 million barrels the week before.

The expectations for a tighter market in the second half of the year is being cemented by data coming from the US and China while the easing restrictions especially in Europe is also supporting the prevailing positive sentiment for the last few days.

The forecast of a larger inventory draw signals a recovery in crude demand in the US, easing investor concerns about declining demand, supporting prices.

Another clear sign on the path of demand recovery comes from the EU region as, according to the World Health Organization, 44% of EU adults have now received at least one dose of vaccine, and many European countries plus the UK have lifted restrictions ahead of the tourism season.

Oil Jumps as U.S Inventories Shrink for Second Straight Week