The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories fell by 4.689 million barrels in the week ended August 21. Economists had forecast a decrease of 3.694 million barrels.

At the same time, gasoline stocks dropped by 4.584 million barrels, while analysts had expected a decline of 1.533 million barrels. Distillate stocks rose by 1.388 million barrels, while analysts had forecast a drop of 0.726 million barrels.

Meanwhile, oil production in the U.S. increased by 100,000 barrels a day to 10.800 million barrels a day.

U.S. crude oil imports averaged 5.9 million barrels per day last week, up by 185,000 barrels per day from the previous week.

FXStreet notes that oil consumption has started to recover as economies reopen while OPEC+ production cuts are doing their part in the rebalancing of supply and demand. Nonetheless, full commitment to cuts is yet to be made. All in all, strategists at Danske Bank see Brent trading at $40 the rest of the year while forecast the commodity to rise next year reaching $60 by end-2021.  

“The return to more normal market conditions is a long uphill ride. The significant inventory overhang is limiting a swift recovery in US shale production. Drilling activity here remains subdued. Even when there comes room to increase output, it remains to be seen how easy it will be to turn on wells that have been shut-in.” 

“OPEC+ stands committed on output cuts now, although compliance has yet to reach 100%. As the oil price recovers, the commitment may start to falter. On a medium to long-term horizon, low investment activity now may result in supply shortages.”  

“The oil market should stay resilient, but short-term the rally might take a breather since high inventories have yet to be normalised and OPEC+ is still struggling with full compliance to output cuts.”

“We keep our forecasts for Brent and look for the black gold to average $40/bbl in Q3 and Q4, $45/bbl in Q1 and Q2 next year, $50/bbl in Q3 and $60/bbl in Q4.”