A day after oil futures hit their highest mark since March, they pulled back slightly on Wednesday, apparently pressured by a surprise weekly increase in U.S. crude supplies.
Increased tensions between the U.S. and China reportedly led to growing tensions for a drop in energy demand as West Texas Intermediate September crude lost 2 cents or 0.05% at $41.90 a barrel on the New York Mercantile Exchange. September futures took over after the August contract expired Tuesday. During Tuesday’s trading, WTI went as low as $41.14 a barrel.
September Brent Crude, the global benchmark on ICE Futures Europe surrendered 3 cents or 0.07% finishing the day at $44.29 a barrel.
Natural gas prices on the MYMEX added a penny to finish the day at $1.68 per MMBtu.
“At this time of year, we usually see larger draws on crude oil from demand and it is becoming quite clear that is slowing down, especially air travel,” Tariq Zahir, managing member at Tyche Capital Advisors told MarketWatch.
The Energy Information Administration reported Wednesday that U.S. crude inventories rose by 4.9 million barrels for the week ended July 17. That compared with an average forecast by analysts polled by S&P Global Platts for a decline of 1.9 million barrels. The American Petroleum Institute on Tuesday reported a climb of 7.5 million barrels.
“On the bearish side, the 500-pound gorilla is the virus and any new shutdowns [of the economy] and overall less demand for crude oil,” Zahir said.
Oil prices, however, only tallied a modest decline for the session. Among supportive factors, Zahir said the market is in the middle of the Atlantic hurricane season with potential for output disruptions, the U.S. dollar has weakened, and positive results in trials for a COVID-19 vaccine could lead to a return in energy demand.
The weekly increase in U.S. supplies may raise questions over a decision by the Organization of the Petroleum Exporting Countries and their allies earlier this month to taper production cuts from 9.7 million barrels per day to 7.7 million barrels starting from August, Lukman Otunuga, senior research analyst at FXTM, told MarketWatch. “Given the state of the global economy and rising coronavirus cases in the United States, oil remains exposed to downside risks.”
The EIA data also showed crude stocks at the Cushing, Oklahoma, storage hub edged up by about 1.4 million barrels, while total domestic oil production climbed by 100,000 barrels to 11.1 million barrels a day last week.
Gasoline supply fell by 1.8 million barrels, while distillate stockpiles climbed by 1.1 million barrels, according to the EIA. The S&P Global Platts survey had shown expectations for a supply decline of 2 million barrels for gasoline and an inventory increase of 280,000 barrels for distillates.
While oil prices slipped, so did some of the Oklahoma related energy shares. Devon dropped 2.47% or 28 cents a share and leveled off at $11.07. ConocoPhillips lost 77 cents or 1.85% and finished trading at $40.89.
EOG Resources slipped 23 cents or 0.50% and ended the day at $50.19 a share. Marathon Oil fell 8 cents or 1.20% to settle at $5.79. Noble Energy was down 11 cents or 1% to finish at $10.86 a share.
ONEOK dropped 48 cents or 1.61% and settled at $29.50. Phillips 66 fell $1.17 or 1.77% to end the day at $65.25.
But on the Utilities Sector Entergy jumped $3.58 a share or 3.59% to finish at $103.13 a share. American Electric Power, parent company to PSO added $1.72 and settled at $89.28.