Following up on the heels of Wednesday night’s announcement from API that crude oil inventories had plunged in the latest week, Thursday’s update from the DoE confirmed that decline. While traders were expecting crude oil inventories to increase by 905K barrels, stockpiles actually declined by 14.5 million barrels. Yes, you read that correctly. To put that decline in perspective, since 1983 there has only been one other week where weekly inventories declined by a larger amount (1/1/99). As you can imagine, crude oil prices spiked on the news and were up by nearly 4% on the day.
Looking at the chart below, crude oil inventories are still considerably above average after rising throughout much of July and August even as that is usually a period of the year where stockpiles decline. That being said, this week’s drop reversed all of the summer’s build up. What remains to be seen is how much of this week’s decline was related to Hermine travels through the Gulf of Mexico and the east coast this week. In the short term, if you are long crude oil, this week’s drawdown is certainly welcome.
While not quite as dramatic as the drawdown in crude oil, gasoline inventories also saw a large decline. Here, traders were expecting stockpiles to fall by 750K barrels, but the actual decline was more than five times that at 4.211 million barrels. As shown in the chart below, gasoline stockpiles have generally been tracking the seasonal pattern, albeit from a higher starting point. Over the last five weeks, though, the rapid decline in inventories is starting to chip away at the gap between current and average levels.