US crude oil inventories fell significantly for the week ending May 29 according to the American Petroleum Institute's report. The decline of 6.75 million barrels was almost double the expected decrease of approximately 3.6 million barrels, indicating a tighter supply than traders had anticipated.
In the previous week, there was already a reduction of 2.8 million barrels, suggesting a trend toward decreasing inventory levels. The recent data suggests that this acceleration is noteworthy following a month in which April experienced substantial inventory draws of 4.4 million and 4.5 million barrels. This trend is unprecedented when considering previous data: in January 2023, the API reported a build of 14.87 million barrels, while by July 2023, it logged a draw of 15.40 million barrels. The current drop of 6.75 million barrels is positioned at the high end of significant declines.
The API releases its inventory data weekly on Tuesday evenings, ahead of the official Energy Information Administration report that usually follows a day later. A discrepancy of this magnitude can influence market movements even before the official figures are published.
An inventory draw that is nearly double the consensus estimate is interpreted positively for oil prices. A lower supply in storage indicates a tighter physical market, which often leads to increased crude futures prices in the days following the report.
What should investors look for next? The key metric will be the official EIA inventory report. If it confirms a draw nearing 6.75 million barrels, the bullish sentiment surrounding crude oil is likely to solidify. Conversely, a significantly smaller decline could temper optimism in the market.