DTN Oil

WASHINGTON (DTN) -- Nearest-delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled the Wednesday session higher. The market was spurred by a larger-than-forecast drop in U.S. commercial crude-oil inventories and bullish manufacturing data out of major demand centers, pointing to ongoing recovery for refined fuels against the backdrop of resurgent coronavirus.

On the session, NYMEX August West Texas Intermediate futures advanced $0.55 to settle at $39.82 per barrel (bbl) and Brent crude for September delivery finished Wednesday above $42 per bbl. NYMEX ULSD August futures gained 1.31 cents to $1.1996 a gallon and front-month RBOB contract advanced 1.54 cents to $1.2169 a gallon.

U.S. refining activity reached a nearly 76% capacity-utilization rate in the most recent week, the highest since the final week of March, Energy Information Administration data show. Combined with a decline in imports and exports holding near 3 million barrels per day (bpd), refined activity above 14 million bpd has led to a supersized 7.2 million bpd decline in crude-oil inventories, EIA reported. The drawdown, the largest of the year so far, snapped the string of three consecutive weekly builds, each of which pushed inventories to fresh record-highs.

U.S. gasoline consumption unexpectedly eased 47,000 bpd to 8.561 million bpd, EIA said, coinciding with resurgent coronavirus infections in parts of the United States, namely states that traditionally have been centers for U.S. gasoline use. Texas, Florida and California have been hit with a massive outbreak in the last 10 days or so, triggering re-closure of businesses and renewed calls for social distancing.

In contrast, distillate demand grew by 9% to 3.778 million bpd, just 1.3% below last year's levels, according to EIA. Manufacturing activity in the U.S. jumped to a 14-month high of 52.5 in June, according to Institute of Supply Management Institute data released Wednesday morning, indicating expansion after April's plunge to 41.5%.

"The manufacturing sector is reversing the heavy contraction of April, with the PMI increasing month over month at a rate not seen since August 1980, with several other indexes also posting gains not seen in modern times," read the comments from the report.

Manufacturing activity in Europe and Asia continued to show steady improvements over the month of June, with China's PMI index sitting firmly above the 50 threshold, separating expansion from contraction.

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

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