U.S. Crude oil reserves drop more than expected for a third week

The Energy Information Administration said in its weekly oil reserves report that U.S. Crude Oil Inventories fell more than analysts expected in the week ending July 12, extending the all-time record fall during the previous two weeks. However, an unexpectedly large increase in gasoline stockpiles during the peak of the U.S. driving season limited gains.

On the New York Mercantile Exchange, WTI crude for September delivery rose to $105.93 a barrel at 15:03 GMT, up 0.23% on the day. Prices held in daily range between $106.11 and $104.80 per barrel respectively. Light, sweet crude trimmed its weekly decline to little over 0.2% so far after gaining almost 9.9% during the preceding two weeks.

Meanwhile on the ICE Futures U.S. Exchange, Brent oil for August delivery traded at $108.56 a barrel at 15:03 GMT, up 0.38% for the day. Prices ranged between daily high and low of $108.42 and $107.31 respectively. The European benchmark cut its weekly decline to 0.5% after gaining around 6.8% in the last two weeks.

The EIA said in its weekly report that U.S. Crude Oil Inventories fell by 6.9 million barrels to 367.0 million in the week ending July 12, placing them in the upper half of the average range for this time of the year. Refineries operated at 92.8% of their operable capacity last week. Gasoline production decreased, while distillate fuel output increased, averaging 9.0 million and 5.1 million barrels per day respectively.

U.S. gasoline stockpiles added 3.1 million barrels last week, standing well above the upper limit of the average range for this week of the year. Distillate fuel inventories increased by 3.9 million and were in the lower half of the average range.

The Energy Information Administrations report confounded analysts expectations, extending the all-time record high 20.2 million barrels drop to 373.9 million in the 14 days ending July 5. According to a Bloomberg survey, the EIA should have reported crude reserves have fallen by 2 million barrels last week. Gasoline inventories were supposed to drop by 1.5 million barrels, while distillate fuel inventories were expected to have risen by 1.5 million barrels.

Meanwhile, oil was also supported as Federal Reserve Chairman Ben Bernanke said in prepared remarks before his statement to Congress that the central bank’s bond purchasing program is not on a “preset course” and reiterated his opinion from last week that the U.S. economy still needs an accommodative monetary policy in the foreseeable future.

“I emphasize that, because our asset purchases depend on economic and financial developments, they are by no means on a preset course,” Bernanke said. He also stated that the easy money supply may be maintained longer and the bond purchases may even be increased, if the situation worsens.

Market players remained cautious ahead of Ben Bernankes testimony to Congress after different Fed presidents stated opposite opinions regarding the futures of the central banks bond purchasing program.

Oliver Jakob of Petromatrix in Zug said for Reuters: “For now, the reaction in the oil market is pretty muted. Theres no big change in Bernankes prepared comments. Its still all about a potential reducing of bond buying by the end of the year.”

Meanwhile, investors will also be keeping an eye at the remaining U.S. economic data for the week. The Labor Department will release Initial Jobless Claims on Thursday. The number of people who have filed for unemployment payments is expected to have dropped by 20 000 to 340 000 after last week an unexpected surge to 360 000 supported Bernanke’s statement that the U.S. labor market is still fragile. The Philadelphia Fed Index is also to be released on Thursday with expectations for a poorer performance, compared to the previous reading.