The American Petroleum Institute (API) estimated that crude oil inventories in the United States rose by 2.69 million barrels in the week ending July 30, despite analyst expectations for a draw of 2 million barrels. In the previous week, U.S. crude inventories fell by 3.3 million barrels. The API figure is a private industry estimate and typically precedes the official government tally from the Energy Information Administration (EIA), which markets watch for confirmation.

Commercial crude oil inventories excluding the Strategic Petroleum Reserve (SPR) have declined by just over 58 million barrels over the last 16 weeks, while U.S. crude inventories are down 7.2 million barrels for the year, according to API data. Those declines have been partly offset by withdrawals from the SPR.

For the week ending July 31, another 2.9 million barrels left the SPR, bringing total inventories to 304.8 million barrels. That is far below the 2023 low reached during the Biden administration's large drawdown and the lowest level in more than 43 years. SPR inventories are now 427 million barrels below maximum capacity.

The generally accepted operational minimum for oil in the SPR is between 250 million and 300 million barrels, below which the reserve may have difficulty pumping and processing oil efficiently. With inventories now at 304.8 million barrels, the reserve is approaching the upper bound of that range, a threshold that has drawn scrutiny from lawmakers concerned about the nation's capacity to respond to a major supply disruption.

U.S. production for the week ending July 24 slipped to 13.796 million barrels per day, down slightly from 13.798 million barrels per day in the prior week and up 482,000 barrels per day from a year earlier. The United States remains the world's largest crude producer, and output near 13.8 million barrels per day has helped offset OPEC+ supply management efforts to support prices.

At 2:11 p.m. ET on Tuesday, Brent crude was trading at $79.24 a barrel, down 5.41% on the day and nearly $5 a barrel lower week over week as the market continued to price in rumors of a possible Iran-U.S. peace deal. West Texas Intermediate was trading at $75.97 a barrel, down $4.62, or 5.75%, on the day and more than $3 a barrel lower than at the same time last week. Iran is an OPEC member whose oil exports have been constrained under U.S. sanctions; any diplomatic breakthrough that could facilitate additional Iranian barrels reaching the global market would add supply at a time when traders are already weighing soft demand growth expectations.

Gasoline inventories rose by 156,000 barrels in the week ending July 31, after increasing by 918,000 barrels in the prior week. In the previous week, gasoline inventories were already 6% below the five-year average for this time of year, according to the latest EIA data, a notable level during the peak summer driving season when demand typically peaks.

Distillate inventories fell by 1.2 million barrels after rising by 355,000 barrels in the previous week. The latest EIA data showed distillate inventories were 9% below the five-year average heading into the reporting period, keeping diesel supplies tight as agricultural and freight activity ramp up later in the year.

Cushing inventory, the stockpile held at the delivery hub for the WTI crude futures contract, rose by 2.358 million barrels over the reporting period after falling by 273,000 barrels in the prior week. Cushing levels are closely tracked by traders because WTI futures contracts are physically settled at the Oklahoma hub, and swings there can influence prompt-month pricing.

By Julianne Geiger for Oilprice.com