WTI Oil Rebounds From Session Lows As Crude Inventories Decline

Key Insights

• Crude inventories decreased by 5.1 million barrels from the previous week. 
• Domestic oil production declined from 12.3 million bpd to 12.2 million bpd. 
• U.S. sold 1.1 million barrels of oil from the Strategic Petroleum Reserve.

On April 26, EIA released its Weekly Petroleum Status Report, which indicated that crude inventories declined by 5.1 million barrels from the previous week, compared to analyst consensus of -1.5 million. At current levels, crude oil inventories are about 1% below the five-year average for this time of the year.

Crude oil imports did not play a major role in crude oil inventory dynamics as they increased by just 81,000 bpd and averaged 6.4 million bpd.

Total motor gasoline inventories declined by 2.4 million barrels, while distillate fuel inventoried decreased by 0.6 million barrels from the previous week.

Domestic oil production declined from 12.3 million bpd to 12.2 million bpd. At this point, it looks that domestic oil production will need significant catalysts to move above the 12.3 million bpd level in the near term.

Importantly, the U.S. continued to sell oil from the Strategic Petroleum Reserve, which declined from 368 million barrels to 366.9 million barrels. SPR has not been at these levels since September 1983.

Oil markets rebounded from session lows after the release of the EIA report. The drop in inventories exceeded analyst expectations, which was bullish for oil prices. The decline in domestic oil production served as an additional positive catalyst. WTI oil moved towards the $76.50 level, while Brent oil rebounded above $79.50.

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