Oil Futures Follow Equities Higher

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Wednesday's session higher, with gains spurred by a sharp rebound in equity markets and expectations for U.S. crude oil stockpiles to have declined for the seventh consecutive week through Sept. 4, while concerns over a stalled economic recovery and muted demand growth capped the upside.

At settlement, West Texas Intermediate for October delivery added $1.29 to $38.05 barrel (bbl) after plunging to a nearly 3-month spot low $36.13 bbl prior session. The international crude benchmark Brent November contract advanced $1.01 for a $40.79 bbl settlement. NYMEX ULSD October surged 2.93 cents or 2.6% to $1.1061 gallon and front-month RBOB contract added 1.65 cents to finish at $1.1193 gallon.

Analysts expect U.S. crude oil stockpiles were drawn down about 1.2 million bbl during the week ended Sept. 4 following a much steeper drawdown of 9.4 million bbl week prior. Refinery runs are seen to have fallen by 1.5% to 75.2% of capacity, which follows a steep 5.3% decline during the previous week ahead of Hurricane Laura and Tropical Storm Marco.

Gasoline inventories are likely to have declined by about 2.9 million bbl last week and stocks of distillates, which include heating oil and diesel, are expected to have fallen by about 1 million bbl.

American Petroleum Institute and U.S. Energy Information Administration will release weekly inventory report a day later due to the Labor Day holiday. API's data is scheduled to be published 4:30 p.m. EDT followed by government statistics at 11 a.m. EDT Thursday.

Oil traders will also closely watch demand figures in this week's data as the summer driving season came to an end on Monday and many refiners are slated to shut units down for seasonal maintenance.

Private data shows traffic volumes in the United States jumped to their highest level this year over the holiday Labor Day weekend before falling by about 40% so far this week, fueling fears over weaker-than-expected off-season gasoline demand. In the summer months, consumption for motor gasoline was estimated 9.2% below the comparable year-ago period, while 14% less than 2019 this year through August.

EIA this afternoon cut its global oil demand projections for both 2020 and 2021 due, in part, to lower-than-expected consumption growth in China which the agency now pegs at about 1 million barrels per day (bpd) for next year. China, as in years past, is seen as the main driver in the global recovery for oil demand, with imports seen growing towards a record high 13 million bpd in June and July. In August, however, Beijing reduced its crude purchases as much as 7.4% to 11.18 million bpd and analysts forecast imports are likely to decline further in October and November.

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

Liubov Georges