Not since March 6 have crude oil futures in the U.S. been as high as they were when trading finished Wednesday at just under $41 a barrel. Still not enough to give exploration and production companies a break-even point. Many consider it to be at least $50 a barrel before they can possibly start to make a profit.
West Texas Intermediate crude rose 28 cents or 0.7% to settle at $40.90 a barrel in trading on the New York Mercantile Exchange.
Global benchmark Brent oil for September was up 21 cents or 0.5% at $43.29 a barrel on the ICE Futures Europe exchange.
What prompted the gain? An increase in U.S. crude imports and a weekly decline of gasoline supplies suggested an improved energy demand is underway.
It also occurred as crude supplies at the storage hub in Cushing rose by 2.2 million barrels for the week while total oil production was unchanged at 11 million barrels a day, according to new data released Wednesday by the U.S. Energy Information Administration.
A closer look at the data shows that the crude-oil build happened “due to higher crude oil imports,” said Manish Raj, chief financial officer at Velandera Energy. “This is a huge positive, since it suggests growing domestic oil demand and the U.S. acting as the market of last resort for this commodity.”
Also, “gasoline inventory declined by nearly 5 million barrels, despite higher refinery runs and increased production,” Raj told MarketWatch. “As U.S. drivers are back on the roads, growing oil demand is highly positive.”
The Energy Information Administration reported Wednesday that U.S. crude inventories rose by 5.7 million barrels for the week ended July 3. That followed a fall of 7.2 million barrels the week before and compared with a forecast by analysts polled by S&P Global Platts for an average decline of 3.7 million barrels. The American Petroleum Institute on Tuesday reported an increase of about 2 million barrels.
Total net petroleum imports stood at 5.01 million barrels per day, up from 2.88 million a week earlier, EIA data show. Imports of commercial crude oil were at 7.39 million barrels per day, up from 5.97 million.
“A pop in net imports above 5 million barrels per day for the first time since last August has led to a solid build in oil inventories, despite refining activity rising to a 14-week high at 14.3 million barrels per day,” Matt Smith, director of commodity research at ClipperData, told MarketWatch.
“Offsetting this bearish build was the largest draw to gasoline inventories since early March, as implied demand gradually recovers,” he said.
Gasoline supply fell by 4.8 million barrels, while distillate stockpiles climbed by 3.1 million barrels. The S&P Global Platts survey had shown expectations for supply declines of 1.2 million barrels for gasoline and 500,000 barrels for distillates.
The weekly fall in U.S. gasoline supplies came on the back of average implied demand of 8.5 million barrels a day over the four week period ended July 3, which is down 12.5% from the same period last year, EIA data show. That an improvement from the previous report, which showed the four-week implied demand down by 15%.
On Nymex Wednesday, August gasoline rose by nearly 1.3% to $1.2909 a gallon, but August heating oil fell 0.7% to $1.2344 a gallon. August natural gas settled down 2.8% at $1.824 per million British thermal units, ahead of the EIA’s weekly update on supplies of the fuel due out Thursday.
Local energy firms saw a mixture of the impact with SandRidge Energy seeing a 2-cent or 1.61% gain, settling at $1.26 a share.
Devon Energy rose a penny to finish at $10.36 while ConocoPhillips was up 40 cents or 0.98% to end the day at $41.04.
EOG Resources fell 67 cents or 1.40% to finish the day’s trading at $47.47. ONEOK dropped 0.80% or 22 cents to settle at $27.36.
Phillips 66 dropped 63 cents or 0.98% and ended the day at $63.98 a share.
On the Utilities Sector, American Electric Power rose 3 cents and finished at $82.42.