WASHINGTON (DTN) -- Nearby-delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange advanced Wednesday, although all contracts settled off intra-session highs spurred by government inventory data released for the week-ended June 18 showing U.S. crude oil inventories dropped to the lowest level since early March 2020 when the coronavirus pandemic disrupted mobility and fuel consumption.
Wednesday's inventory report from the Energy Information Administration was bullish, showing U.S. commercial crude oil inventories fell a larger-than-expected 7.6 million barrels (bbl) last week, extending the destocking pattern for a fifth consecutive week. At 459.1 million bbl, domestic crude oil stockpiles now stand about 6% below the five-year average. The large crude drawdown was also accompanied by an unexpected drop in gasoline inventories, down 2.9 million bbl from the previous week, compared with analysts' expectations for an 800,000 bbl increase. Gasoline supplied to the U.S. market, a measure for demand, jumped to the highest level since the disruption of the Colonial pipeline last month triggered widespread panic buying at the pump. The bearish part of the report, however, were distillate inventories that built by 1.8 million bbl from the previous week as demand fell below 4 million barrels per day (bpd) at 3.974 million bpd.
Limiting upside for the complex, the U.S. dollar index gained some lost ground Wednesday, edging up 0.09% against the basket of foreign currencies to 91.835, following congressional testimony from Federal Reserve Chairman Jerome Powell where he reiterated that recent price increases are likely to remain subdued and "resolve themselves" over time.
The Fed's chief, however, acknowledged that some inflation pressures are stronger and more persistent than he had anticipated, though still not on par with 1970s-style inflation.
"I will say that these effects have been larger than we expected, and they may turn out to be more persistent than we have expected," he added. "But the incoming data are very consistent with the view that these are factors that will wane over time, and inflation will then move down toward our goals and we'll be monitoring that carefully."
Atlanta's Federal Reserve President Raphael Bostic said Wednesday that he expects high inflation to persist longer than the central bank initially expected, perhaps 6 to 9 months instead of 2 to 3.
Consumer price index surged 5% year over year in May, the highest in nearly 13 years amid a jump in used car prices and a slew of other goods that have seen surging demand as quarantine restrictions eased.
The latest update on the Fed's preferred inflation metric -- the core personal consumption expenditures price index -- will be released Friday.
On the session, NYMEX August WTI contract gained $0.23 to settle at $73.08 per bbl and ICE August Brent crude advanced $0.38 to $75.19 per bbl. NYMEX July RBOB futures surged 4.26 cents to $2.2669 per gallon, and July ULSD futures gained 0.84 cent to $2.1594 per gallon.
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