Crude Prices Rebound on Significant U.S. Inventory Draw

U.S. crude oil prices climbed over 1.5% midday Thursday, buoyed by a larger-than-expected drawdown in nationwide inventories that signals tightening supplies. West Texas Intermediate (WTI) crude was trading at $90.07 per barrel, a gain of $1.39, according to live price data.

The rally followed the U.S. Energy Information Administration's weekly report showing commercial crude inventories fell by 3.3 million barrels for the week ending May 22. According to OilPrice.com, this draw brings total stockpiles to 441.7 million barrels, placing them 2% below the five-year average for this time of year. The reported decrease was steeper than the 2.8 million-barrel draw predicted by the American Petroleum Institute a day earlier and aligned with forecasts from analysts like Macquarie strategists, who had predicted a week-on-week stock drop, as reported by Rigzone.

The inventory decline was not limited to crude. The EIA data showed gasoline inventories dropped by 2.6 million barrels, and distillate stocks fell by 2.1 million barrels, the latter now sitting 11% below the five-year average. Total product supplied, a proxy for demand, averaged 20.2 million barrels per day over the last four weeks, up 1.5% year-over-year.

For Bakken operators, the price rally is tempered by a persistent regional discount. The Bakken differential to WTI was recorded at -$3.42 per barrel midday Thursday. This means Bakken crude at the wellhead is priced roughly at $86.65. However, the strong rise in the benchmark WTI price still translates to higher absolute revenues compared to earlier in the week when prices dipped.

The midday gains represent a partial recovery from a recent slump. OilPrice.com noted that earlier Thursday, prices rebounded following Wednesday's drop, which had seen Brent crude trade below $95. Despite today's increase, prices remain down substantially from the previous week.

The combination of falling inventories across key petroleum categories and steady demand is providing fundamental support for oil markets. This supply tightening is a positive indicator for Bakken producers, suggesting a firmer price floor as the summer driving season approaches. The focus for local operators will now be on whether the differential narrows to allow them to capture more of the gains from the rising benchmark.