Oil started the Asian trading session today bullish on the back of continuously shrinking U.S. crude oil and fuel supplies which indicates a strong fuel demand outlook.
U.S. crude oil supply data from the U.S Energy Information Administration (EIA) revealed that stockpiles fell for the fifth week, the longest run since January 2021. The data showed a draw of 7.641 million barrels for the week ended June 18, 2021. The decline was bigger than the 3.942 million barrels forecasted by Investing.com and bigger than the 7.355 million barrels decline recorded during the previous week.
Gasoline inventories also recorded a bigger than expected decline of 2.93 million barrels when it was forecasted to decline by 0.833 million barrels by investing.com. Crude oil supply from the American Petroleum Institute released the day before showed a decline of 7.199 million barrels for the week while forecast expected a decline of 3.625 million barrels.
The continuous draws are indicative of a tightening market as the U.S., China and parts of Europe continue their economic recovery from the COVID-19 pandemic. The global COVID-19 vaccine rollout has also played a major part in the accelerated recovery of these economies which in turn led to increased fuel consumption and a drain in stockpiles that had built up as COVID-19 brought lockdowns and halted travel in early 2020.
What to expect
As the U.S stockpiles are declining, the higher the oil demand will be. This will ultimately push the price of oil northward. Investors are however advised to invest with caution as a new strain of COVID-19 is threatening the efforts already made on vaccination.
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Investors should turn attention to the Organization of the Petroleum Exporting Countries and allies (OPEC+) meeting. The organization will discuss its production policy for August when it meets next week, with some member states reportedly looking to vote for an output increase.
U.S oil futures is up 0.51%, currently trading at $73.43 a barrel while Brent oil futures is up 0.45%, currently trading at $75.53 a barrel as of the time of writing this report.