WASHINGTON (DTN) -- Nearby-delivery-month crude and product futures on the New York Mercantile Exchange dropped in afternoon trade Thursday and Brent crude on the Intercontinental Exchange settled just above $40 per barrel (bbl). The losses followed a bearish inventory report from the Energy Information Administration showing a surprise build in U.S. commercial crude oil supplies and counter-seasonal drop in gasoline demand during the week leading into the holiday Labor Day weekend.
The agency reported gasoline supplied to the U.S. market decreased for the second consecutive week through Sept. 4, sliding to the lowest level this summer at 8.390 million barrels per day (bpd), further pressuring gasoline futures into afternoon trade Thursday. NYMEX RBOB October contract finished Thursday's session at a 2 1/2-month spot low $1.0977 per gallon, down more than 7% so far this week.
This summer's gasoline demand is seen as lackluster at best given that it topped 9 million bpd only once over the season in mid-August. Most mobility measures indicate traffic activity in the United States flatlined in July and August after an initial bounce back from government reopenings, dulling sentiment for an improvement in gasoline use for the balance of 2020.
Further weighing on the complex, the U.S. refining utilization rate, at 71.8%, also fell for the second week in a row amid plant shutdowns due to Hurricane Laura and early seasonal maintenance programs. In Gulf Coast PADD 3, refiners reduced utilization rates to as low as 63.9% in the week ended Sept. 4, said EIA.
Contrasting with calls for a modest draw, U.S. commercial crude oil inventories increased 2 million bbl from the previous week to 500.4 million bbl, widening a year-on-year surplus to more than 20%. Domestic crude production edged 300,000 bpd higher to 10 million bpd as operators restored offshore Gulf of Mexico output shut in by the hurricane.
On the session, West Texas Intermediate for October delivery shed 75 cents to $37.66 per bbl at settlement, with losses accelerating post-settlement, and international crude benchmark Brent November contract declined 73 cents to settle at $40.06 per bbl.
Front-month ULSD October futures dropped 2.37 cents to $1.0824 per gallon.
Economic data released Thursday showed jobless claims for the week ended Sept. 5 totaled 884,000, little changed from the previous week's revised levels, said the Labor Department. The new reading was mostly in line with market expectations. Continued unemployment claims -- the number of people receiving benefits for consecutive weeks -- increased 93,000 from the previous week to 13.385 million; however, this was above expectations for 12.925 million. Overall, the report was neutral.
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