Crude oil inventories dropped for the eighth straight week in the Energy Information Administration’s Weekly Petroleum Status Report for the week ended June 19, 2015.
Inventories peaked at 490,912 MBO in the last week of April, but have since averaged weekly declines of about 3,490 MBO. The current level of 462,993 MBO is still about 22% above the five-year average, but marks a sharp decline from April’s excess of nearly 30%.
Cushing storage has declined to about 56,200 MBO and is at 80% capacity. The pipeline crossroads of the world unloaded 1,900 MBO in the latest report, accounting for nearly 40% of the overall draw.
Gasoline inventory rise and possibility of Iran sanction drop pressure crude
Oil prices dipped slightly after the announcement, affected by other factors offsetting the storage reduction.
“The crude drawdown was sizable and casts the report in a bullish light, but the second consecutive increase in gasoline inventories is a counterweight,” said John Kilduff, partner at Again Capital LLC in an interview with Reuters. “The demand for crude oil from refiners and gasoline from drivers are both supportive elements, but gasoline’s position as a seasonal leader is fading fast, making its impact transitory.”
Crude inventories falling back to earth from all-time highs, coupled with a possible end of sanctions on Iran, have oil traders preparing for prices to drop back to the $50 level. The major movers, such as Russia and Saudi Arabia, have made no inclinations to cutting production. United States production has mostly leveled off at the moment – a result of more than half of its rigs being idled.
Goldman Sachs said last month it believes oil will slide to as low as $45 by October, fueled by excess supply and “excess capital,” or the generous financing from the market that has allowed some cash-strapped E&Ps to remain in business. Goldman believes the rally is not an accurate representation of recovery and believes it will be “self-defeating.” It’s worth noting the firm has featured one of the most bearish views on the oil market; its Brent forecast is not expected to exceed $65 through 2020.