OIL FUTURES: Crude rally extends as EIA reports tighter US inventories

Crude oil futures settled higher July 28 on the heels of a US Energy Information Administration report showing lower US production and tightening supply.

NYMEX September WTI settled up 74 cents at $72.39/b and ICE September Brent climbed 26 cents to $74.74/b.

Total US commercial crude oil stockpiles contracted 4.09 million barrels to 435.6 million barrels in the week ended July 23, EIA data showed, pushing inventories 7.1% behind the five-year average.

Total US crude production was down 200,000 b/d at 11.2 million b/d, a four-week low, but the decline was largely offset by a 130,000 b/d slide in total refinery net crude inputs, which were the weakest since May at 15.88 million b/d.

Still, the EIA report painted a bullish picture of crude markets continuing to tighten as demand outstrips supply in coming months, analysts said.

"Crude prices held onto gains after the EIA crude oil inventory report showed the oil market will stay tight as production appears capped and demand remains strong," OANDA senior market analyst Ed Moya said in a note. "Oil prices seem like they still have a one-way ticket higher, needing to wait out the current delta variant jitters for another couple weeks."

NYMEX August RBOB settled 59 points lower at $2.3082/gal while August ULSD climbed 1.21 cents to $2.1560/gal.

Gasoline inventories declined 2.25 million barrels to 234.16 million barrels, an eight-week low, led by a 3.18 million-barrel slide in US Atlantic Coast stocks to 64.7 million barrels. However, the inventory slide was well short of the more than 6 million-barrel draw seen by the American Petroleum Institute on July 27.

The weaker-than-expected gasoline draw came as implied gasoline demand edged just 30,000 b/d higher during the week to 9.33 million b/d. At that level, demand was 2.6% behind the five-year average of EIA data, the widest deficit since late June.

"[Gasoline demand] has proven highly volatile in recent weeks. It has not yet managed to exceed the average level of the years 2015-19. The summer driving season has so far not quite lived up to the high expectations, in other words," Commerzbank analyst Carsten Fritsch said in a note ahead of the EIA release.

Despite supportive inventory data, the continued rise in global coronavirus cases has dimmed global demand recovery outlooks and added headwinds to oil prices.

According to the US Centers for Disease Control and Prevention data, the seven-day moving average for coronavirus cases in the US reached 53,772 July 26, its highest level since late April.

In Europe, the UK continued to see the highest number of cases in the Continent, despite a reduction in daily cases the past week. The number of daily deaths hit a four-month high in the UK July 27.