U.S. Inventories Surprise to the Upside
Bearish pressure intensified after the EIA reported a 2.4 million barrel build in crude inventories, defying expectations for a draw. Refinery maintenance and narrower margins suggest throughput could soften further into September. Combined with U.S. production holding steady at record highs above 13.5 million barrels per day, the inventory data reinforced the perception that the supply side of the market is well covered, undermining any bullish narrative around tightness.
Weak U.S. Data Darkens Demand Outlook
The demand side offered no relief. U.S. payrolls grew by just 22,000 in August versus forecasts for 75,000, while job openings dropped to their lowest level in ten months. Manufacturing contracted for a sixth straight month, underscoring weakness in industrial fuel consumption. While the Federal Reserve is expected to cut rates at its September meeting, traders doubt easier monetary policy will deliver a meaningful boost to energy demand in the near term.
Geopolitical Risks Take a Back Seat
Although Ukraine’s drone campaign has disrupted some Russian refining capacity, crude export flows remain intact. As a result, geopolitical risks are being discounted compared to the more immediate drivers of OPEC+ supply policy, U.S. stock builds, and weakening demand signals.
