WTI Oil Falls Below $70 Despite Bullish EIA Report

Key Insights

• Crude inventories decreased by 3.8 million barrels from the previous week. 
• Domestic oil production declined from 12.4 million bpd to 12.2 million bpd. 
• Strategic Petroleum Reserve fell from 351.7 million to 350 million barrels. 

On June 22, EIA released its Weekly Petroleum Status Report. The report indicated that crude inventories declined by 3.8 million barrels from the previous week, compared to analyst consensus of +0.33 million barrels.

Total motor gasoline inventories grew by 0.5 million barrels, while distillate fuel inventories increased by 0.4 million barrels. Crude oil imports declined by 220,000 bps from the previous week, averaging 6.2 million bpd.

The EIA report showed that the U.S. continued to sell oil from the Strategic Petroleum Reserve. The SPR decreased from 351.7 million barrels to 350 million barrels.

Domestic oil production declined from 12.4 million bpd to 12.2 million bpd. Domestic oil production has been mostly stable in the 12.2 million – 12.4 million range, and it remains to be seen whether it could grow above 12.5 million bpd at current oil price levels.

WTI oil pulled back below the $70 level after the release of the report, while Brent oil declined below $74.50. Interestingly, the report did not provide support to oil markets, although it included bullish catalysts like falling inventories and declining domestic production.

It looks that traders are focused on the hawkish comments from Jerome Powell and fear that additional rate hikes would put too much pressure on the economy and reduce demand for oil. The surprising rate hike from the BoE, which raised rates by 50 bps, put additional pressure on the price of oil.

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