WTI Futures Settle at 5-Month High

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- New York Mercantile Exchange nearby delivery month oil futures and spot month Brent crude on the Intercontinental Exchange rallied in afternoon trade Wednesday with the U.S. benchmark notching its highest settle in five months after government data showed across-the-board draws in U.S. petroleum supplies during the first week of August, while a deal between Moderna and the U.S. government on a COVID-19 vaccine fueled additional buying interest.

Moderna announced the U.S. government has agreed to purchase 100 million doses of the company's experimental coronavirus vaccine with the option to buy up to an additional 400 million doses. The Moderna COVID-19 vaccine is currently in late-stage trials. News of progress in vaccine development has rallied the markets in recent months, spurring hopes for robust demand growth in the second half of the year.

The coronavirus pandemic continues to spread across the United States, with the number of confirmed U.S. cases topping 5.3 million Tuesday, according to Centers of Disease Control. The rise in infections, however, has not resulted in sustained increase in the number of daily deaths, a key metric for markets.

The Organization of the Petroleum Exporting Countries on Wednesday revised lower demand estimates for 2020, forecasting a larger fall of 9.06 million barrels from last month's forecast of 8.95 million barrels.

"Crude and product price developments in the second half of 2020 will continue to be impacted by concerns over a second wave of infections and higher global stocks," OPEC said in its latest monthly report.

OPEC maintained its 2021 demand projections for a rebound of 7 million barrels per day (bpd) but said the outlook was subject to large uncertainties that might result in "a negative impact on petroleum consumption."

Oil futures posted across-the-board gains Wednesday after the U.S. Energy Information Administration reported crude oil stocks declined for the third week in a row and demand for refined products extended higher during the week ended Aug. 7.

Total commercial petroleum inventories dropped 6.2 million barrels (bbl) during the week reviewed, EIA reported, with 4.5 million bbl of that decrease occurring in crude oil stocks alone. After declining for three straight weeks, U.S. crude oil stocks now stand at 514.1 million bbl, a fresh 17-week low, but still about 15% above the 5-year average.

Domestic production dropped 300,000 bpd to 10.7 million bpd in the week profiled, the lowest level since the week ended June 12 and only the second time this year below 11 million bpd.

U.S. gasoline demand reversed the week prior decline, up 266,000 bpd or 3.1% to 8.883 million bpd, the highest level since the week ended March 13. Distillate fuel consumption gained 162,000 bpd or 4.4% to 3.862 million bpd, the highest level since the final week of March.

At settlement, West Texas Intermediate crude oil for September delivery advanced $1.06 to $42.67 bbl and the spot month international Brent crude contract rallied 93 cents to finish at $45.43 bbl. NYMEX ULSD September futures gained 1.88 cents to $1.2572 gallon and front-month RBOB futures surged nearly 4 cents or 3% to $1.2438 gallon settlement.

Liubov Georges can be reached at liubov.georges@dtn

Liubov Georges