US crude inventories rose for the first time in 11 weeks as rising production and imports outpaced demand, while the Iran ceasefire breakdown sent Brent above $77.
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US crude stockpiles post 3 million barrel build, snapping 11-week draw
US commercial crude stockpiles rose 3 million barrels to 411.4 million in the week ended July 3, the EIA said Wednesday, defying analyst expectations for a 1.4 million barrel draw.
The build — the first after 10 consecutive weekly declines that had drained almost 60 million barrels — came as domestic production edged up 50,000 barrels a day to almost 13.9 million, while imports increased and exports fell, the EIA's Weekly Petroleum Status Report showed.
The headline build masked divergent trends across the petroleum complex. Gasoline inventories fell 1.9 million barrels, and distillate stockpiles dropped 5 million barrels to 12% below the five-year average. The Strategic Petroleum Reserve lost another 6.2 million barrels, falling to 325.7 million — the lowest level in more than four decades and 405 million barrels shy of maximum capacity.
The data presents a split signal: the crude build suggests near-term oversupply, but product draws and the SPR's continued depletion point to structural tightness. The geopolitical backdrop escalated Wednesday after President Donald Trump declared the Iran ceasefire over following tanker attacks in the Strait of Hormuz, sending Brent up $3.21 to $77.37 and WTI up $2.97 to $73.41 — both more than $5 above last week's levels.
US crude production averaged 13.81 million barrels a day in the week ended June 26, up 377,000 from a year earlier. Total products supplied — a proxy for demand — averaged 20.6 million barrels a day over the four weeks ended July 3, up 0.3% year over year. Gasoline demand averaged 9 million barrels a day, while distillate demand averaged 3.8 million, down 0.9%.
The American Petroleum Institute had estimated a 399,000 barrel draw, making the EIA's reported build a significant miss relative to both the API estimate and the consensus forecast from a Wall Street Journal survey of analysts. Cushing, Oklahoma — the delivery hub for the WTI futures contract — saw inventories fall 69,000 barrels after rising 503,000 the prior week.
Geopolitical Risk Resets the Price Floor
The breakdown of the US-Iran ceasefire reintroduced a risk premium that had been absent from crude prices. Iranian attacks on tankers transiting the Strait of Hormuz — through which about a fifth of global oil passes — pushed Brent more than $5 higher from last Wednesday. The last time the strait faced a sustained disruption threat was in 2019, when attacks on Saudi Aramco facilities at Abqaiq and Khurais knocked out 5.7 million barrels a day of production and sent crude soaring 15% in a single session.
The EIA's next weekly report, due July 15, will show whether the build was a one-week anomaly or the start of a trend reversal. With distillate inventories 12% below the five-year average and winter heating season approaching, the market's focus may shift from crude oversupply to product tightness in the months ahead.
This article is for informational purposes only and does not constitute investment advice.