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Limited seats available, first come first served. Let us join together for the appointment with sustainability! [Click to register] On October 16, the latest weekly report from the U.S. Energy Information Administration showed that commercial crude oil inventories fell by 8.6 million barrels in the week ending October 9, dropping to 415.6 million barrels.
OEXN noted that total inventories are still about 3% above the five-year average for the same period, so although the single-week decline is prominent, it cannot by itself prove that the entire oil market has already entered a sustained shortage. The inventory position still needs to be measured alongside other factors.
Alongside the decline in crude oil, gasoline inventories rose by 3.5 million barrels, while distillate inventories fell by 2.5 million barrels. OEXN analyzed that the different directions of the three inventory categories indicate that refinery product mix and end-user consumption rhythms are diverging.
In particular, distillate inventories are about 12% below the five-year average, and their supply buffer is more limited than that of crude oil inventories. Over the past four weeks, product supplied averaged 21.1 million barrels per day, up 2% year over year, but distillate supplied edged down 0.2% year over year. This set of data suggests that low inventories may come from demand, but may also be related to changes in production and distribution.
Product supplied is only a proxy indicator for consumption, and short-term fluctuations cannot be fully explained as a strengthening of actual end-user purchases, still less can they be used to infer that all oil products are tightening in sync. Weekly statistics are also easily affected by shipping schedules and storage timing, and cumulative changes over several consecutive weeks are usually more helpful for identifying the direction of supply and demand than an isolated increase or decrease. The next inventory report needs to be cross-checked with refinery runs, imports and exports, and product output.
OEXN believes that if gasoline continues to build inventories while distillate restocking remains slow, the market's focus may fall more on product spreads. The large crude oil inventory drawdown provides an important clue, but the direction of oil prices still depends on whether such changes can continue, rather than on the size of the figure in any single statistical week.
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