Oil Prices Finish Higher as U.S. Oil, Fuel Inventories Ease.
Oil prices closed higher on Wednesday due to significant declines in U.S. crude and fuel stocks, despite concerns over weak global demand. This rise ended three consecutive sessions of decline, influenced by falling U.S. crude and fuel inventories and increasing oil supply risks from Canadian wildfires.
Brent crude futures for September rose by 70 cents, or 0.9%, to settle at $81.71 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude for September increased by 63 cents, or 0.8%, to $77.59 per barrel.
The Energy Information Administration (EIA) reported that U.S. crude inventories dropped by 3.7 million barrels last week, surpassing analysts’ expectations of a 1.6-million-barrel draw. U.S. gasoline stocks fell by 5.6 million barrels, against an anticipated 400,000-barrel draw, and distillate stockpiles, including diesel and heating oil, decreased by 2.8 million barrels versus an expected increase of 250,000 barrels.
“Demand is better than anticipated,” noted Bob Yawger, director of energy futures at Mizuho in New York. He added that robust gasoline demand supports the overall market in the short term, with increased distillate demand further boosting the market.
However, the market remains cautious about global summer demand. U.S. oil refiners are expected to report significantly lower second-quarter earnings compared to last year due to a lackluster summer driving season that weakened refining margins, according to energy analysts.
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Prices are also pressured by ceasefire talks between Israel and Hamas and ongoing concerns about an economic slowdown in China, the world’s largest crude importer, potentially weakening global oil demand. Crude oil deliveries to India, the world’s third-largest oil importer and consumer, fell in June to their lowest since February, according to government data. Over the previous three sessions, WTI lost 7%, while Brent declined nearly 5%.
Supporting prices, wildfires in Canada forced some producers to reduce production, posing a substantial supply threat. Imperial Oil stated it has reduced non-essential staff at its Kearl oil sands site as a precaution. Additionally, Russia’s energy ministry committed to adhering to the crude-output quota set by the OPEC+ group in July, following its June production exceeding limits.
