Crude Down, Looks Through Record US Inventory Draw

Oil prices fell around 2% driven by the general pullback in risk sentiment following Fitch’s downgrade of the US’ sovereign credit rating to AA+ and concerns regarding the demand outlook. The sharp drop in US crude stocks didn’t help. WTI closed below $80/bbl. The USD index is 0.3% higher.

• WTI fell 2% to $79.75/bbl and has started the APAC session slightly lower at $79.66. It is off Wednesday’s low of $79.05 but well off the high of $82.43. Support is at $77.09, the 20-day EMA. Brent is down 1.9% to $83.45 after a low of $82.74 and a high of $85.99 earlier. Support is at $81.06.
• Official EIA US crude inventories fell a record 17.05mn barrels last week. But it was largely ignored as the error margin around the data has been significant lately. Gasoline stocks rose 1.48mn barrels and distillate fell 796k. Demand for gasoline fell for the fourth consecutive week despite it being the driving season, which is adding doubt to the outlook. In addition, there are thoughts that China’s demand has peaked as stocks are rising, according to Bloomberg.
• The US is forecast to export a record 2.2mbd to Asia in August as China, South Korea, Taiwan and India look to other producers following Saudi Arabia’s output cuts. Global shipments to Asia may be slightly higher than July but to Europe are likely to be less.