(Bloomberg) -- Further evidence that fuel demand is staging a gradual comeback in the world’s biggest economy was eclipsed by another increase in overall inventories, showing the market is still grappling with a huge supply glut.
Gasoline and distillate inventories fell last week, according to a report from the Energy Information Administration, reflecting a slight pick-up in demand during the summer driving season with coronavirus-led lockdowns easing in some parts of the U.S.. However, stubbornly high crude inventories threaten to put a floor under crude’s rally from historic lows in April.
“The distillate draw is a clear sign of the reopening of the economy and transportation returning,” said Rob Thummel, portfolio manager at Tortoise. “We still need to see inventories come down. That’ll be the catalyst for oil prices to move higher.”
A second wave of the pandemic could also spur further losses for oil. Beijing is battling a fresh wave of coronavirus infections, forcing the government to close all schools and cancel more than 1,200 flights.
Earlier on Wednesday, OPEC predicted that fuel demand will remain “under pressure” during the second half of the year because of the ongoing economic fallout from the coronavirus, a day before ministers were due to assess world markets.
Saudi Arabia, Russia and other members of the OPEC+ coalition are due to hold an online meeting on Thursday to review the impact of the biggest ever production cuts announced.
The EIA report also showed that U.S. crude production fell by 600,000 barrels a day to 10.5 million. While that would appear quite bullish, last week’s data also coincided with the passage of Tropical Storm Cristobal, which forced some producers to shut output in the Gulf of Mexico.
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