The Commodities Feed: Risk-Off Sentiment Weighs on Energy and Metals as US Oil Inventories Record Steep Decline

The Commodities Feed: Risk-off sentiment weighs on the complex

The overall risk-off sentiment has weighed on the commodity complex with both energy and metals facing the pressure. US crude oil inventory dropped by a record 17MMbbls last week, reflecting a tight physical market.

 

Energy – US weekly oil inventories report record declines

The oil market came under pressure yesterday and traded weak this morning as rising US Treasury yields and strength in the USD index overshadowed a record drop in the US crude oil inventories.

The weekly petroleum status report from the Energy Information Administration (EIA) was constructive for the oil market and shows that US commercial crude oil inventories dropped by a record 17MMbbls over the last week to 439.8MMbbls, the lowest since January and around 1% below the five-year average for this time of the year. The market was anticipating a drawdown of just 0.8MMbbls while the American Petroleum Institute (API) reported a withdrawal of 15.4MMbbls the day before.

Meanwhile, oil inventories at Cushing, Oklahoma, fell by 1.3MMbbls for a fifth consecutive week to 34.5MMbbls, the lowest since the first week of May. The inventory withdrawal mainly comes amid a backdrop of a jump in exports which increased to around 5.3MMbbls/d last week compared to 4.6MMbbls/d in the preceding week. The majority of the demand came from Asian refiners as they boosted the purchase of US oil following the output cuts by OPEC+ members.

As for refined product inventories, gasoline inventories rose by 1.5MMbbls, against a forecast for a decline of 1.3MMbbls, while distillate stockpiles fell by 0.8MMbbls last week, higher than expectations of a decline of 0.3MMbbls. Meanwhile, refineries operated at 93.5% of their capacity, up from 93.1% in the previous week and 92.9% for the same period last year. Domestic crude oil production remained largely unchanged at 12.2MMbbls/d last week.