Investing.com -- Saudi oil production cuts may no longer be the news; not even weak Chinese buying, perhaps. It’s U.S. production that’s demanding attention now, with crude output in the world’s largest economy projected to have reached a new three-year high last week.
Global oil markets remained under pressure for a third day in a row despite the U.S. Energy Information Administration, or EIA, citing a crude drawdown of almost 6 million barrels last week — virtually identical to what it reported as the prior week’s build.
The EIA’s reporting on crude stockpiles has turned volatile lately, with the agency citing a record draw of 17.049M barrels two weeks ago, as global stockpiles see shifts from a Saudi bid to cut an additional million barrels per day from their production while buying from top oil importer China slows.
A closer examination of the EIA’s weekly report showed last week’s crude draw possibly resulted from a spike in U.S. crude exports, which rose to 4.599M barrels from a prior 2.36M.
Notwithstanding the crude draw, market chatter was on U.S. production, which the EIA estimated last week at a new three-year high of 12.7M barrels per day.
In the previous week to Aug. 4, the EIA estimated crude production at 12.6M. Prior to these two weeks, the agency had not projected such a high number for output, following the record 13.1M barrels produced daily before the coronavirus outbreak in March 2020.
Crude stockpiles fell by 5.960M barrels during the week ended Aug. 11, after the build of 5.851M in the prior week to Aug. 4, the EIA said. Industry analysts tracked by Investing.com had forecast a decline of just 2.32M for last week.
On the gasoline inventory front, there was a draw of 0.261M after the prior week’s 2.661M slide. Analysts had forecast a draw of as much as 1.26M for last week.
While automotive fuel gasoline is the No. 1 U.S. fuel product, demand for it has been lackadaisical this summer, with draws often coming below analysts' calls and weekly builds sometimes registered in the place of draws.
With distillate stockpiles, there was a surprise build of 0.296M versus a forecast draw of 0.473M and the prior week’s decline of 1.706M. Distillates are refined into heating oil, diesel for trucks, buses, trains and ships and fuel for jets.
The EIA report did not help the sentiment in oil, which could see its first weekly decline in eight if there’s no adequate turnaround by Friday’s close.
With two hours to Wednesday’s close, New York-traded West Texas Intermediate, or WTI, crude was down 47 cents, or 0.6%, to $80.52 a barrel, clinging to the $80 per barrel support. WTI lost 2.6% in two prior sessions, bringing its week-to-date drop to 3.2%.
That was a breakaway from a previous seven-week rally inspired by optimism over Saudi production cuts that left the U.S. crude benchmark up 20% in all, with a 9-month high at $84.89.
“WTI crude looks like it is ready to consolidate here, which means downward pressures might target the $79.20 level,” said Ed Moya, analyst at online trading platform OANDA.
“Oil is also battling a strong dollar, which looks like it might not be done strengthening unless we get some action from China and Japan. The U.S. manufacturing outlook is still downbeat despite [being] boosted by rising auto production.”
London-based Brent crude was down 36 cents, or 0.4%, to $84.53. Week-to-date, Brent was down 2.6% after a seven-week rally that gave oil bulls an 18% return and a seven-month high of $88.10.