US Energy Information Administration data for the week to 12 June showed crude oil inventories falling by 8.262m barrels. That compared with a forecast draw of 4.6m barrels.
The outturn implies stocks declined by 3.662m barrels more than expected, based on the forecast. The figures refer to US crude oil inventories as reported by the EIA.
Stronger Than Expected Demand Supports Bullish Oil Market
The significant draw in crude inventories, nearly double what was forecast, points to unexpectedly strong demand. We see this as a clear bullish signal for the oil market. This suggests consumption is robust as we head into the peak of the summer driving season.
This report aligns with our view of strengthening seasonal demand. Recent data shows U.S. gasoline consumption is up nearly 2.5% from this time last year, with refinery utilization rates now exceeding 95% to meet fuel needs. This confirms that crude is being actively processed, not just sitting in storage.
Supply Dynamics and Positioning for Peak Season Prices
On the supply side, we note that OPEC+ has reaffirmed its commitment to maintaining production cuts through the third quarter. This removes a key source of potential new supply that could have offset the strong demand. The market is therefore tighter than many had anticipated just a few weeks ago.
Given these factors, we are positioning for higher prices in the coming weeks. We believe buying call options on WTI and Brent futures for August expiration offers a favorable risk-reward profile. This strategy allows for participation in the expected upward trend through the peak demand period.
Historically, oil prices often find a seasonal peak in July, and this year’s setup feels very familiar. The combination of a surprise inventory draw and solid demand is reminiscent of past summer rallies. We anticipate this trend will continue and possibly accelerate as we move deeper into July.
