Oil Futures Advance as US Crude, Gasoline Stocks Fall

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange reversed higher in early trade Wednesday, with the U.S. crude benchmark moving back above $67 per barrel (bbl) after the American Petroleum Institute reported draw downs in nationwide crude and gasoline stockpiles last week, while lingering concerns over slowing economic growth triggered by rising COVID-19 infections continue to cap the market's upside.

Near 7:15 a.m. ET, NYMEX September West Texas Intermediate futures gained $0.62 to $67.23 bbl ahead of expiration on Friday, with the October contract trading with a $0.26 discount. ICE October Brent crude rose $0.74 to near $69.79 bbl. NYMEX September RBOB futures gained 0.99 cents to $2.1755 gallon, and September ULSD futures advanced 1.77 cents to $2.0538 gallon.

Should early gains hold through the session, oil futures would snap a four-day losing streak, finding support from Tuesday's API inventory report showing U.S. crude stockpiles fell 1.163 million bbl during the week-ended Aug. 13 and gasoline supplies declined 1.197 million bbl. The draws were smaller than expected, with crude stocks seen to have fallen by a larger 1.3 million bbl and gasoline stocks to have dropped 2.1 million bbl. Distillate inventories also rose 502,000 bbl that was above estimates for a 100,000 bbl increase.

Oil traders now await the release of official inventory data from the U.S. Energy Information Administration, on tap for a 10:30 a.m. ET release.

The modest gains are also realized as the U.S. dollar pauses a rally, which lifted the currency to a 93.145 4 1/2-month high settlement on Tuesday, as the likelihood for the Federal Reserve to begin reining in its bond purchasing program later this year heightened. The stronger dollar follows a 1.1% decline in U.S. retail sales in July, as Americans bought less goods amid inflationary pressures caused, in part, by supply and labor shortages.

Accelerating coronavirus infections amid a highly transmissible Delta variant also weighed on consumer sentiment in early August, with the index on consumer expectations from the University of Michigan fell to the lowest reading since March 2020 when the pandemic shuttered the economy and labor market.

While investors gauged through disappointing data on retail sales and consumer sentiment, the seven-day moving average for daily infections moved above 100,000 cases in mid-August to 114,190, up 18.4% from the prior week, data from the Centers for Disease Control and Prevention.

Federal Reserve Chairman Jerome Powell acknowledged during a virtual Town Hall on Tuesday that the impact COVID-19 is having on the world's biggest economy, saying it has "cast a shadow" on the recovery.

Minutes from the Federal Open Market Committee's July 27-28 meeting, set for release Wednesday afternoon, is expected to show an increasing number of central bank officials are prepared to set a timeline on tapering the Fed's $120 billion a month buying of Treasuries and mortgage-backed securities. Several Fed officials in recent interviews said they are considering begin tapering as soon as October.

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

Liubov Georges