Oil lost gains after plunge in US demand

US oil inventories showed a significant decrease again, with those of gasoline remaining unchanged to the surprise of the market, causing new pressures on crude prices.

In particular, as informed by the US Energy Information Administration (EIA), in the week ended August 19, US crude inventories fell by 3.3 million barrels, falling to 421.7 million.

The decline in inventories was largely in line with S&P Global Commodity Insights’ forecast of 3.2 million barrels, while analysts polled by Reuters had expected a much smaller decline of 933,000 barrels.

It is worth noting, however, that the decline in stocks was largely limited by the new release of oil from the US strategic stockpile during the week, by more than 8 million barrels.

What surprised analysts the most were gasoline inventories that remained essentially unchanged (down just 27,000 barrels), when the Reuters estimate called for a drop of 1.5 million barrels and the S&P for 2.5 million.

The impact of the unexpected drop in demand for gasoline was also immediately felt on the board, with crude oil contracts immediately erasing their intraday gains.

Specifically, the Brent October is now moving with losses 0.7% and trades in $99.58 the barrel, while within the day it had reached up to 101.9 dollars.

Similarly, from the high of the day at 95.4 dollars a barrel the American WTI September is now trading at $93.3 with losses 0.5%.

It is characteristic that despite the recovery it showed last week, with the new data the total demand for gasoline in the four-week average falls short by 7% from the same period last year.

Analysts are concerned about weak fuel demand, saying it portends a marked slowdown in economic activity.

“Although crude inventories have moved sharply lower, the plunge in gasoline demand is dragging the market lower,” notes Andrew Lipow, president of Lipow Oil Associates. “To me, that’s the most remarkable thing about the statistics,” he adds.