(Bloomberg) — Oil pared losses as US stockpiles dropped to the lowest level this year and a rally in equities bolstered risk assets. West Texas Intermediate traded above $79, rebounding from an earlier plunge below $78. US crude inventories dwindled to the lowest since December 2022, according to a government report Wednesday, showing that supplies remain tight despite concerns about a potential slowdown in demand. Inventories at the nation’s biggest storage hub in Cushing, Oklahoma, slid the most since October 2021. While the bullish stockpile report supports oil prices, the market moves are “all macro right now,” said Rob Thummel, a portfolio manager at Tortoise Capital Advisors. Earlier in the session, prices fell to monthly lows as the contraction in euro-area private-sector activity intensified in August. China’s stuttering economy also continues to threaten demand for global commodities. Crude’s rally since late June has faltered over the last couple of sessions amid the worsening outlook in China and signs the Federal Reserve isn’t yet done with its campaign of monetary tightening. That has overshadowed a tightening market following supply cuts by OPEC+ kingpins Saudi Arabia and Russia. Adding to bearish sentiment, observed exports from Iran have surged to 2.2 million barrels a day this month. Meanwhile, Turkey and Iraq have held a flurry of talks as they seek to restart a major oil pipeline, though they have failed to reach a breakthrough so far.
EIA: US crude inventories down by 6.1 million barrels
Crude oil prices moved higher today, after the Energy Information Administration reported an inventory draw of 6.1 million barrels for the week to August 18. This compared with a decline of a substantial 6 million barrels for the previous week, which in turn followed a build of almost identical size for the week before that. At 433.5 million barrels as of August 18, U.S. commercial crude oil inventories are 2% below the five-year average for this time of the year, the EIA said. In fuels, the authority estimated a gasoline stock build and a middle distillate inventory increase for the week to August 18. Gasoline inventories added 1.5 million barrels in the reporting period, which compared with a minor draw of some 300,000 barrels for the previous week. Gasoline production averaged 9.7 million bpd last week, compared with 9.6 million bpd for the previous week. In middle distillates, the EIA estimated an inventory build of 900,000 barrels for the week to August 18. Production was seen at 5.1 million barrels daily. These figures compared with an inventory build of a modest 300,000 barrels for the previous week, with production during that week averaging 4.7 million barrels daily. Oil prices, meanwhile, remain bound by worry about another U.S. rate hike and China economic indicators. “Investors are reluctant to take big positions ahead of the Jackson Hole symposium as they want to find clues for the next step by the U.S. Federal Reserve,” a Nissan Securities analyst told Reuters. “Concerns over higher interest rates and sluggish demand in China are expected to outweigh tightening supply from OPEC+ in the short term,” Hiroyuki Kikukawa also said. “However, given that fundamentals remain constructive, we believe any price weakness will be relatively short-lived.”