WTI Tumbles on Weak Economic Data

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and Intercontinental Exchange Brent futures settled lower on Wednesday with declines accelerating post-settlement, as investors shrugged off a bullish decline in U.S. crude inventories and turned their focus back to faltering global demand.

Oil futures shed early-session gains spurred by a larger-than-expected 10.8 million barrel (bbl) draw in U.S. crude inventories, with the large inventory decline failing to reignite buying interest and instead sent oil sliding to a three-session low settlement.

Trader concerns over faltering global demand were magnified Wednesday afternoon following a slew of economic data from the Eurozone and the United States. According to the IHS Markit's Purchasing Managing Index report, U.S. manufacturing activity stagnated in July with the PMI Index dropping to 50 from 50.6 in June. Readings below 50 indicate contraction. In the Eurozone, the manufacturing sector tumbled a stunning 1.2 points in July to 46.4 -- a nearly a decade low. The lackluster data follow disappointing numbers for factory activity in Germany, which contracted to a seven-year low this month. Phil Smith, principal economist at IHS, said in a news release, the German data raised "the risk of the euro area's largest member state entering a technical recession."

After the disappointing economic data oil markets struggled to find support from overall bullish supply figures the U.S. Energy Information Administration published at midmorning. Government data showed a sixth consecutive draw in U.S. commercial crude inventories, pushing stockpiles to the lowest level since the week of March 23. According to EIA, domestic crude production declined by a stunning 700,000 barrels per day (bpd) last week to 11.3 million bpd, the lowest level since October 2018. Market analysts largely attribute the steep drop to production shut-ins in the Gulf of Mexico following Hurricane Barry, which affected nearly 70% of the region's output at its peak.

In gasoline stocks, EIA showed a modest drop of 226,000 bbl last week, which was bearish against market expectations for a 1.13 million bbl draw, but bullish compared with the 4.436 bbl build reported late Tuesday by the American Petroleum Institute. Four-week average gasoline demand is, however, down 1.5% against the corresponding four-week period a year ago.

NYMEX September WTI futures settled $0.89 lower at $55.88 bbl and ICE September Brent futures moved down $0.65 to a $63.18 bbl settlement. NYMEX August RBOB dipped 0.54cts to settle at $1.8551 gallon, while the August ULSD contract shed 1.3cts to settle $1.9087 gallon.

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

(BAS)

Liubov Georges