DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures fell sharply at midday Wednesday with front-month West Texas Intermediate futures trading below $42 barrel (bbl) despite government data from the Energy Information Administration showing domestic crude oil and gasoline supplies eroded further during the final week of August and production fell sharply as Hurricane Laura shuttered a large swath of crude output in the U.S. Gulf of Mexico.

Traders probably see the latest EIA figures skewed due to Hurricane Laura's temporary impact on Gulf Coast refining and offshore production activity. Data showed domestic production plunged 1.1 million barrels per day (bpd) during the week ended Aug. 28 when offshore operators in the Gulf of Mexico halted nearly 80% of output in anticipation of the hurricane which reached category four intensity. The Bureau of Safety and Environmental Enforcement Tuesday said operator reports estimate approximately 28.38% or 525,099 bpd of current oil production in the Gulf of Mexico was still shut-in, as operators restart production.

Not surprisingly, refining capacity utilization rate fell sharply last week, down 5.3% to 76.7%, also due to shutdowns ahead of the hurricane. The decline, however, was less than an 11% expected drop.

U.S. commercial crude oil stocks declined for a sixth consecutive week to a 21-week low at 498.4 million bbl, said EIA. The supersized 9.4 million bbl crude draw was far steeper than markets expected but failed to support higher prices in early afternoon trade. WTI October futures plunged to a three-week low $41.57 bbl and Brent crude dropped more than $1 to trade below $45 bbl.

Gasoline supplies also fell by more-than-expected 4.3 million bbl to 234.9 million bbl, while implied gasoline demand plunged 375,000 bpd to 8.786 million bbl on the week. Distillate stocks, which include heating oil and diesel fuel, fell by 1.7 million bbl to 177.5 million bbl, and are now about 23% above the 5-year average, the EIA said.

Total commercial petroleum inventories slid 7.8 million bbl last week, EIA reported. Total products supplied over the last four-week period averaged 18.3 million bpd down 15.9% from the same four weeks in 2019.

Near 12:15 PM ET, front-month ULSD futures declined 3.80 cents to $1.1925 gallon and NYMEX RBOB September futures dropped 3.03 cents or 2.5% to $1.1930 gallon.

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