Oil Nudges Higher on USD After API Data Shows Crude Draw

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange edged higher in early trading Wednesday after industry data from the American Petroleum Institute reported U.S. commercial crude oil inventories unexpectedly declined during the first week of June, while a softer U.S. dollar further spurred gains for the West Texas Intermediate contract.

Near 7:30 AM ET, the U.S. dollar index fell 0.22% against a basket of foreign currencies to trade near 103.840 and WTI July futures advanced $0.91 to $72.65 bbl. August Brent contract traded on ICE gained to $77.17 bbl, up $0.86 bbl. NYMEX RBOB July futures edged higher to $2.5681 gallon and NYMEX ULSD futures advanced $0.0232 to $2.3910 gallon.

Morning gains in the oil complex follow the API report released late Tuesday showing U.S. crude oil stocks fell 1.71 million bbl last week, contrary to expectations for a 1.1 million bbl build. The drawdown came despite another crude transfer of 1.8 million bbl from the nation's Strategic Petroleum Reserve to the commercial side last week. That lowers emergency crude reserves, which sit at a 40-year low, to 353.6 million bbl.

Stocks at the Cushing, Oklahoma tank farm, the NYMEX delivery point for WTI futures, posted a build of 1.535 million bbl.

Data also showed gasoline inventory increased 2.417 million bbl as of June 2, far above calls for a 200,00 bbl gain. Distillate inventory jumped 4.5 million bbl last week, more than four times an anticipated 1 million bbl build.

Next, investors await the release of official data from the U.S. Energy Information Administration on tap for 10:30 AM ET.

Separately, the EIA on Tuesday revised higher its price forecast for Brent crude this year to $79.54 bbl, up from $78.65 bbl projected a month ago, and to $83.51 bbl in 2024. The revisions follow Sunday's (6/4) announcement by OPEC+ to extend 3.6 million bpd in production cuts through the end of 2024 and a unilateral output cut of 1 million bpd unveiled by Saudi Arabia. As a result of these curbs, OPEC's crude oil production is now expected to fall by 600,000 bpd in 2023 and then increase by 300,000 bpd in 2024, which is still lower than EIA's previous forecast for output growth of 600,000 bpd for next year.

Oil inventories held in countries that are part of the Organization for Economic Cooperation and Development are seen gradually falling through the third quarter 2024 before reversing the downtrend.

Despite the extension of OPEC+ production cuts, EIA still forecasts global oil production would increase 1.5 million bpd in 2023 and by 1.3 million bpd in 2024, primarily because of growth from non-OPEC producers.

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

Liubov Georges