WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange advanced in early trade Wednesday, with the U.S. crude benchmark breaking above $71 barrel (bbl) after preliminary inventory data from the American Petroleum Institute showed domestic petroleum stocks posted a larger-than-expected draw for the second consecutive week amid extended production outages in the offshore Gulf of Mexico, while stronger-than-expected industrial data out of European Union further exacerbated concerns over soaring energy prices across the 19-nation economic bloc, pressuring U.S. Dollar Index.
The Eurostat said Wednesday morning industrial output in the 19 countries sharing the euro rose 1.5% month-on-month in July for a 7.7% year-on-year jump, underscoring a quick rebound in the eurozone manufacturing economy. Economists expected 0.5% monthly and 6.1% annual gains. Details of the data reveal capital goods output jumped 2.7% month-on-month in July after a 1.1% drop in June and non-durable consumer goods production was up 3.5% on a monthly basis for a 10.1% annual gain.
Stronger industrial data for the start of the third quarter comes amid a record run in energy prices across the European Union, with low output from the wind energy combined with political will to drive up European carbon emission permits sent local gas prices to all-time highs. The benchmark EU power contract, German Cal 2022 baseload power set a new contract record of $115.09 a megawatt hour this week, while its French equivalent was just off a record $130 USD/MWh.
Elevated energy prices across the EU should be supportive for the broader oil complex heading into the fall/winter season, with forecasts pointing to higher-than-usual demand for heating fuels.
Further boosting the complex, API data reported late afternoon Tuesday showed commercial crude oil inventories fell 5.437 million bbl in the week ended Sept. 10, more than twice calls for a 2.5 million bbl draw. Data show stocks at the Cushing, Oklahoma, hub dropped 1.345 million bbl. Gasoline stockpiles fell 2.761 million bbl in the week ended Sept. 10, above calls for a 2.3 million bbl draw. API data show distillate inventories dropped 2.888 million bbl, surpassing an estimated decrease of 1.7 million bbl.
Around 40% or 720,217 barrels per day (bpd) of current oil production in U.S. Gulf of Mexico remained offline on Tuesday, according to data from the Bureau of Safety and Environmental Enforcement. The day prior, 43.6% was still offline. Following Hurricane Ida, which made landfall Aug. 29 along the southeastern Louisiana coastline, operators in the region have struggled to recover shut-in production due to the severity of the storm. International Energy Agency estimates Ida removed as much as 30 million bbl from the global oil market in recent weeks. Hurricane Nicholas on Tuesday took another swipe at U.S. Gulf Coast oil facilities, disrupting offshore oil and gas output and shut Colonial Pipeline's main gasoline and diesel lines out of Houston, with its gasoline line resuming shipments early afternoon Tuesday.
Royal Dutch Shell said Tuesday it halted production at its Perdido offshore oil platform due to heavy winds, and U.S. liquefied natural gas producer Freeport LNG said processing at its Texas coast facility was halted, likely due to a power outage.
More than 300,000 customers across south-central Texas are still reported without power because of Hurricane Nicolas, down from 400,000. CenterPoint Energy -- a regional power provider for southeast Texas, said Tuesday that electricity is gradually coming back to its customers, but it might take until the end of the week for the system to fully recover. While Nicholas is the second major storm to impact U.S. Gulf region in a little over two weeks, bringing heavy rains and causing power outages, most Texas refineries are operating normally.
Near 7:30 AM ET, NYMEX October West Texas Intermediate contract advanced $0.94 to $71.40 bbl, and Brent crude for November delivery rallied $0.90 to $74.50 bbl. NYMEX October RBOB futures advanced 2.44 cents to $2.1968 gallon, and front-month ULSD futures traded near $2.1869 gallon, up 2.56 cents on the session.
Liubov Georges can be reached at email@example.com