Oil Prices Rise Amid Tight Global Supply, Shrinking Distillate Inventories

Oil prices edged higher on Tuesday, with U.S. benchmark West Texas Intermediate (WTI) crude settling at $84.48 per barrel, a gain of $0.74, according to live price data. The international Brent crude benchmark also rose, closing at $91.33. The Bakken crude differential to WTI was -$3.42.

The price support follows a weekly inventory report from the American Petroleum Institute (API) showing U.S. commercial crude oil inventories fell by a modest 328,000 barrels in the week ending August 14, according to OilPrice.com. This minor draw occurred despite another 5.3 million barrels being released from the Strategic Petroleum Reserve (SPR), bringing the SPR's total down to 293.4 million barrels.

A more significant market driver was the continued sharp decline in distillate fuel inventories, which include diesel and heating oil. The API estimated distillate stocks fell by 2.797 million barrels last week, building on a previous week's draw. Distillate inventories were already 12% below the five-year average heading into the reporting period, OilPrice.com reported.

Gasoline inventories rose by 1.076 million barrels, while Cushing, Oklahoma, storage hub inventories fell by 1.439 million barrels. U.S. crude production for the week ending August 7 was reported at 13.805 million barrels per day (bpd), a slight increase from the prior week and up 521,000 bpd from a year ago.

Global supply concerns provided additional upward pressure. Analysts at Rystad Energy stated that Russian crude oil production has entered "a new era of constraint," according to Rigzone. Furthermore, ongoing geopolitical tensions involving Iran continue to threaten global crude supply flows, Rigzone reported in a separate article.

For Bakken operators, the steady differential and firming outright prices provide a supportive environment. The current WTI price near $84.50, less the -$3.42 differential, translates to a wellhead price for Bakken crude of approximately $81.06. The tightening global distillate market is also a positive indicator for refining demand for light sweet crude oil like that produced in the Williston Basin.

The trajectory of prices will continue to be influenced by the balance of SPR releases, the pace of inventory draws—particularly for products—and the evolving constraints on international supply from Russia and other geopolitical hotspots.