How could oil price react to recent inventory news?

Recovery in oil imports could provide some comfort to the oil market. However, the most recent economic data out of China continues to be a concern for the market and could result in lower demand for crude and other commodities and slower-than-expected global oil demand growth this year. The weaker-than-expected Chinese economic data could start showing up in lower commodity exports in a few months as actual imports lag purchases.

China’s crude oil imports surged by 17.4% in May compared to April, averaging 12.11 million barrels per day (bpd). The May crude arrivals were also 12.2% higher than in May of 2022 when imports averaged 10.79 million bpd. The building of crude inventories has supported crude oil imports and demand despite the mixed macroeconomic data coming out of China in recent weeks.

Despite underwhelming economic data from China that have depressed oil market sentiment in recent weeks, no one has made any material downward revisions to their forecasts for China’s oil demand growth.

China’s economy and oil demand will be the single most important driver of oil prices this year, even if OPEC+ manages to push prices upwards.

The Energy Information Administration (EIA) reported an inventory decline of 500,000 barrels for the week to June 9, which pushed crude oil prices higher. The U.S. crude oil inventories are around 2% below the five-year average for this time of the year.

Gasoline stocks added 2.7 million barrels in the reporting period, which compared with a draw of 200,000 barrels for the previous week. Gasoline production averaged 10.1 million barrels daily.

Middle distillate inventories went up by 5.1 million barrels in the week to June 9, which compared with a build of 1 million barrels for the previous week. Middle distillate production averaged 5.2 million bpd.

Oil prices extended their slide that began on Monday after a quick jump following the latest OPEC+ production cut announcement. Later in the day, they reversed the decline. At the time of writing, Brent crude was trading at $77.10 per barrel and West Texas Intermediate was changing hands at $72.58 per barrel, both up from opening by more than a percentage point.

The stubborn slide in prices from earlier this week was the result of downward pressure coming from mounting concern among traders about global economic growth. However, today it seems the news of the additional Saudi cuts began to sink in, pushing prices higher.