Global prices of crude oil has fallen to their lowest numbers in more than a month. This is according to new data from the Energy Information Administration, who said that US crude stocks, in particular, fell by a far lower amount than they expected. This, they say, raises some questions about overall demand for crude oil during the peak summer driving season, a time when demand is typically very high.
According to the Energy Information Administration, US crude inventories fell by 1.7 million barrels in the week ending June 9, with the original market expectation registering around 2.7 million. It is important to note that gasoline stockpiles rose by a surprising 2.1 million barrels (considering the decline), compared to an expectation of 457,000 gallon drawdown as, it seems, Americans are spending more time traveling to vacations within North America.
As such, OPEC said, in its monthly report, “Although oil prices rebounded from five-month lows in (mid-May), following positive US jobs data and assurances by Saudi Arabia that Russia is ready to join OPEC in extending production adjustments to reduce a persistent supply glut. The market remained in technically oversold territory with futures trading down as much as 19% from highs in mid-April.”
Considering all of this, analysts are not ready to simply rule out that we are about to see a far more rapid drawdown in inventories. The Standard & Poors Energy Sector Index showed a 2.1 drop, overall, with shares of Exxon Mobil falling by 1.4 percent, to hit $81.83; Chevron also fell by nearly 2 percent, to hit $106.18.
All that in mind, ABN Amro chief energy economist Hans van Cleef comments, “Balancing .. is taking longer. But at some point, investors may be surprised to see that supply and demand is in balance and as soon as global inventories start to normalize and come down to the five-year average, then (they) might start to worry that we might even have a shortage in the market.”
In addition, the International Energy Agency (IEA) said, Wednesday, it has expectations that non-OPEC growth supply should be higher within the next year than overall global demand growth.
In its monthly oil market report, the IEA notes, “For total non-OPEC production, we expect production to grow by 700,000 bpd this year, but our first outlook for 2018 makes sobering reading for those producers looking to restrain supply.”