DTN Oil

WASHINGTON (DTN) -- While the ULSD contract advanced, New York Mercantile Exchange West Texas Intermediate and RBOB futures and Brent crude traded on the Intercontinental Exchange settled Wednesday's session with sharp losses. This followed weekly inventory data in the United States that showed an unseasonal drop in gasoline consumption, underscoring concerns spiking fuel prices have undermined usually strong summer driving demand.

Four-week average gasoline consumption in the U.S. during the final week of July fell to the lowest level since late February, according to data released midmorning by U.S. Energy Information Administration. At 8.5 million barrels per day (bpd), the weekly rate of consumption is nearly 12% below the same period last year and some 9% below the five-year average. The drop came as markets fret about an economic slowdown and the potential for a prolonged recession in the U.S. as consumers are clearly pulling back on spending and driving.

More bearish data in the EIA report could be found in the crude complex, with commercial oil inventories unexpectedly climbing 4.5 million barrels (bbl) last week as refiners scaled back run rates to 91%. Gasoline production decreased last week, averaging 9.3 million bpd, while distillate fuel production fell below 5 million bpd.

The Organization of the Petroleum Exporting Countries and 10 partners led by Russia cited the prospect of slowing fuel demand in its decision to boost oil supplies by just 100,000 bpd -- less than a quarter of the 432,000 bpd monthly increase the market has been accustomed to over the past year and much less than 648,000 bpd hike announced for July and August.

Delegates said they are concerned a potential recession in the U.S. and COVID-19 lockdowns in China would weigh on demand growth in the second half of the year. The modest increase highlights limited production capacity by many OPEC+ members that have underdelivered on their pledged targets for over a year.

"The meeting noted that chronic underinvestment in the oil sector has reduced excess capacities along the value chain (upstream/midstream/downstream) ... particular concern that insufficient investment into the upstream sector will impact the availability of adequate supply in a timely manner to meet growing demand beyond 2023 from non-participating non-OPEC oil-producing countries, some OPEC Member Countries," stated OPEC+.

OPEC's muted additions to global supply come after WTI and Brent futures settled at their lowest price point in more than five months earlier this week, giving up the bulk of gains seen since Russia's invasion of Ukraine on Feb. 24.

At settlement, nearby-month delivery WTI dropped to $90.66 per bbl, down $3.76 on the session, while international crude benchmark Brent contract for October delivery fell below $100 to $96.78 per bbl. NYMEX September RBOB declined 14.45 cents to $2.9122 per gallon, while NYMEX September ULSD contract gained 3.44 cents to $3.4148 per gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges can be reached at liubov.georges@dtn.com