Crude oil prices rose to the highest level since 2018 after a report from the American Petroleum Institute (API) on Tuesday showed a substantial draw in US crude oil inventories of 8.537-million barrels for the week ending June 11.
This is an indication of a tightening market as major economies continue to reopen from the Covid-19 lockdown, assisted by the coronavirus vaccination programmes.
According to a report from oilprice.com, analysts had initially predicted a much smaller draw of 3.290 million barrels for the week.
In the previous week, the API reported a draw in crude oil stockpiles of 2.108 million barrels after analysts had predicted a draw of 2.036 million barrels
The API report also shows that crude oil inventories have fallen by over 22 million barrels since the start of 2021, although they are still up by 34 million barrels since January 2020.
Brent crude rose by 0.61% on Tuesday evening to close at $74.44 per barrel, the American Western Texas Intermediate (WTI) rose by 0.65% to close at $72.59 per barrel, the Bonny light crude rose by 0.83% to close at $73.26 per barrel, while the OPEC basket rose by 0.95% to close at $71.99 per barrel.
Oil prices are on the increase as the market adjusts to a new demand outlook that suggests oil could be on its way back in the second half of this year, despite earlier predictions that oil demand could take years to recover to pre-pandemic levels.
While crude oil inventories fell yet again this week, US oil production rebounded to an average of 11 million barrels per day for the week ending June 4, according to the latest data from the Energy Information Administration. This is up to 200,000 BPD from the week prior.
The API reported a build in gasoline inventories of 2.852 million barrels for the week ending June 11 as against the previous week’s 2.405-million-barrel build. Analysts had predicted a draw of 614,000-barrel for the week.
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The increase in energy demand is also boosted by a cautious approach to boosting oil supply by the Organization of Petroleum Exporting Countries and its allies (OPEC+), with some oil traders and analysts saying that they see further gains in oil.