U.S. crude oil inventories defy analysts’ expectations

The Energy Information Administration said in its oil reserves report that U.S. crude stockpiles rebutted analysts predictions for a fifth consecutive weekly drop and instead increased. Gasoline stockpiles gained, while distillate fuel reserves declined. Negative reserves data however was offset by previously released upbeat U.S. data, which boosted demand prospects.

On the New York Mercantile Exchange, WTI crude for September delivery traded at $104.09 a barrel at 15:05 GMT, up 0.93% on the day. Prices ranged between days high and low of $104.10 and $102.95 a barrel respectively. Light, sweet crude fell 0.99% on Tuesday, bringing this week’s decline to 0.5% after closing 3.33% lower last week. However, the American benchmark is still headed to its best monthly advance since August 2012 after hitting a 16-month high earlier in July and having gained more than 7%.

Meanwhile on the ICE, Brent oil for September delivery fell to $106.78 a barrel by 15:06 GMT, down 0.13% on the day. Futures held in range between days high and low of $106.99 and $105.75 per barrel respectively. The contract slipped 0.56% on Tuesday, bringing current week’s decline to 0.2% after falling 1.8% during the previous two. The European benchmark however is also set to marking its best monthly performance since August 2012, supported by geo-political risks to supply.

Oil continued to fall on Wednesday as the Energy Information Administration reported U.S. crude oil inventories increased during the week ending July 26, confounding analysts expectations for fifth consecutive decline. The government agency reported that crude stockpiles increased by 0.4 million barrels, or 0.1%, last week. Refineries input averaged 16.0 million barrels per day, which was 66 000 bpd below the preceding weeks average. Refineries operated at 91.3% of their operable capacity, behind last weeks 92.3% and projections for a rise to 92.5%. Gasoline production increased, while distillate fuel output decreased, averaging 9.5 million and 4.8 million barrels per day respectively.

The EIA also reported that total gasoline stockpiles increased by 0.8 million barrels, or 0.3%, last week, which was above the upper limit of average range for this time of the year. Distillate fuel inventories dropped by 0.5 million barrels and remained near the lower limit of the average range.

EIAs statistics completely rebutted analysts expectations prior to the report. According to a weekly Bloomberg survey, crude oil inventories were supposed to have fallen by 1.5 million barrels in the week ending July 26. Gasoline stockpiles should have shown a 1.5 million barrels decline, while distillate fuel were expected have increased by 450 000 barrels.

Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said for Bloomberg: “The days of dramatic drawdowns are over and the U.S. oil supply situation is going back to a normal mode.”

Oil however was supported throughout the day as upbeat U.S. economic data boosted demand prospects. The country’s Advance Gross Domestic Product rose to 1.7% in the second quarter, outperforming analysts’ expectations for a decrease to 1.0% from the preceding period’s downward revised reading of 1.1%. Preliminary Personal Consumption Expenditures rose by 1.8% in the second quarter, surpassing expectations for a drop to 1.6% from the previous period’s 2.6% increase.

Meanwhile, Automatic Data Processing Inc. reported earlier today that the U.S. economy created more jobs than projected by analysts. July’s ADP Employment Change indicator rose to 200 000, compared to forecasts for a decline to 180 000 from June’s upward revised reading of 198 000 jobs.

Market players remain cautious ahead of Fed’s meeting statement that will be released at 18:00 GMT. Oil, like other dollar-priced commodities, trades inversely to the U.S. dollar. Strengthening of the currency makes raw materials more expensive for foreign currency holders and reduces their appeal as an alternative investment.

Investors will also be keeping an eye on other upcoming U.S. data to gauge the strength of the U.S. dollar. Apart from the employment data throughout the week, Personal Income, Personal Spending, Average Hourly Earnings and Factory Orders will be released on Friday.