Crude Oil Output Drops to a Two-Decades Low

Market Overview

The crude oil market is currently experiencing volatility following the release of the latest EIA report, which indicated a stronger-than-expected draw from oil stockpiles. Additionally, OPEC's oil output has fallen to its lowest level in over two decades, with production dropping to approximately 16.13 million barrels per day in May, as reported by Reuters.

Price Movements

As of the latest data, oil prices are testing the 38.2% Fibonacci retracement level at $92.97 after a significant sell-off from a swing high of $97.58. The market is currently showing indecision at this level, with the EMA-48 flattening below the EMA-240, indicating a bearish short-term bias. The RSI is at 55.7, suggesting a recovery but lacking decisiveness. A rejection at this level could target the 23.6% retracement at $91.88, while a break above $93.85 (50% Fib) would shift momentum to a bullish outlook.

Inventory Changes

According to the EIA report, crude oil inventories decreased by 7.23 million barrels, significantly exceeding the forecasted decline of 2.2 million barrels. This brings total commercial crude stocks to 426.5 million barrels, approximately 5% below the five-year seasonal average.

Specific Inventory Changes:

• Cushing, Oklahoma hub: -0.801 million barrels (previous: -0.583 million)
• Gasoline: +0.186 million barrels (forecast: +1.0 million — a significant miss)
• Distillate: -0.2 million barrels (forecast: +0.171 million)
• Total commercial petroleum inventories: -5.6 million barrels for the week

Refinery Operations

Refinery operations are currently running at 95.3% of operable capacity, processing 17.0 million barrels per day, which is an increase of 80,000 barrels per day from the previous week. Gasoline production averaged 9.7 million barrels per day, while distillate output averaged 5.2 million barrels per day, both showing week-on-week increases.

Imports and Demand

Crude oil imports averaged 5.9 million barrels per day, down 0.5 million barrels per day from the previous week and 5.8% lower than the same four-week period last year. On the demand side, total products supplied over the past four weeks averaged 20.6 million barrels per day, reflecting a year-on-year increase of 3.5%. Distillate demand has risen by 7.2% year-on-year, while gasoline demand has decreased by 0.5% and jet fuel demand has fallen by 2.2%.

OPEC Supply Context

OPEC's crude output has decreased by 1.06 million barrels per day month-on-month in May, marking the lowest level in over two decades. This decline is primarily attributed to a U.S. naval blockade on Iran and disruptions in the Strait of Hormuz, which have significantly reduced Gulf exports. Iran has experienced the most substantial decline, with Saudi Arabia also reporting decreases, while Iraq, Venezuela, and Nigeria have partially offset these losses. This context reinforces the tightness suggested by the recent large draws in U.S. crude inventories.