A government report showing a large drop in U.S. crude inventories, including those in Cushing, Oklahoma resulted in oil futures posting their highest close in five months in Wednesday’s trading. But analysts say an unexpected increase in gasoline stocks apparently stalled the oil futures increase.
West Texas Intermediate crude for September delivery finished the day up 49 cents or 1.2% at $42.19 a barrel in trading on the New York Mercantile exchange. It had been as high as $43.52.
Global benchmark Brent crude for October closed up 74 cents or 1.7% and finished at $45.17 a barrel on ICE Futures Europe. The Wednesday close for both WTI and Brent were their highest settlements since March 6 reported MarketWatch.
The Energy Information Administration said U.S. crude stocks fell by 7.4 million barrels in the week ended July 31, while gasoline inventories rose 419,000 barrels and distillate supplies increased by 1.6 million barrels.
“Despite ongoing subdued refining activity amid stymied demand, oil inventories showed a large draw, even though we saw a rebound in imports,” said Matt Smith, director of commodity research at ClipperData. “The U.S. Gulf Coast accounted for the entire drop, where inventories drew by 7.4 million barrels amid low waterborne imports and ongoing strength in exports.”
Meanwhile, gasoline and distillate inventories rose “as implied demand continues to be adrift of year-ago levels,” he said.
Analysts surveyed by S&P Global Platts, on average, had looked for EIA crude inventories to show a fall of 4.1 million barrels, while gasoline stocks are forecast to decline 1.3 million barrels and distillate supplies are seen rising 100,000 barrels.
Gains for crude were stoked late Tuesday when the American Petroleum Institute, an industry trade group, said U.S. crude-oil inventories fell 8.6 million barrels last week, according to sources. API said gasoline stocks fell by 1.7 million barrels, while distillate supplies rose by 3.8 million barrels.
Some market watchers warned that upbeat expectations reflected by the crude rally may be premature.
“Though fears of weak demand due to corona are beginning to recede into the background at present, we believe the optimism displayed by oil market participants and oil prices themselves to be excessive,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note. “OPEC’s premature expansion of production and the fact that demand remains fairly weak argue against any further price rise.”
On the supply side, OPEC+ pledged to cut output by 9.7 million barrels a day beginning in May, easing to 7.7 million barrels a day this month and running through the end of the year. Countries that exceeded the earlier curbs are supposed to further curtail output, which means output is targeted to rise by around 1.5 million barrels a day beginning this month, though skeptics doubt that past violators of such agreements will fully comply.
Some of the Oklahoma related stocks showed signs of improvement as Ovintiv rose 56 cents for a 5.33% change before settling Wednesday at $11.07 a share.
SandRidge Energy was up 15 cents or 9.26% to finish at $1.77 per share.
Devon Energy saw an increase of 8.57% or 95 cents per share to end the day at $12.04.