Oil Moves Lower on Surprise Inventory Build

Crude oil prices ticked down today, after the U.S. Energy Information Administration reported an inventory build of 3.6 million barrels for the week to June 21.

This compared with a draw of 2.5 million barrels that pushed prices higher last week, as it was accompanied by inventory declines in gasoline and middle distillates as well, suggesting strengthening demand.

Meanwhile, the American Petroleum Institute yesterday estimated an oil inventory build of less than 1 million barrels for the week to June 21, which despite its size weighed on prices.

The Energy Information Administration also reported a gasoline inventory increase of 2.7 million barrels for last week, which compared with a draw of 2.3 million barrels for the previous week.

Gasoline production last week averaged 9.9 million barrels daily, which compared with 10.2 million barrels daily in the prior week.

In middle distillates, the EIA estimated an inventory draw of 400,000 barrels for the week to June 21, which compared with a draw of 1.7 million barrels for the previous week.

Middle distillate production averaged 4.9 million barrels daily last week, which compared with 4.8 million barrels daily for the week before.

Oil prices, meanwhile, moved higher earlier today despite the API’s bearish inventory report. The rise was driven by deepening concern about Middle Eastern conflicts between Israel and its neighbors as well as predictions of a further pick-up in demand for oil during the third quarter.

“It seems the market is shrugging off demand concerns for now, anticipating inventory drawdowns in peak third quarter demand season. Official Energy Information Administration (EIA) inventory numbers today will provide the market further pointers on the trend,” DBS Bank analyst Suvro Sarkar told Reuters.

ING’s Warren Patterson and Ewa Manthey also expect strong demand for oil in the third quarter, which would lead to tighter supply and more headspace for oil prices.

By Irina Slav for Oilprice.com

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