DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Wednesday's session sharply higher. The gains followed inventory data from the U.S. Energy Information Administration showing domestic crude oil stockpiles declined by a massive 9.6 million barrels (bbl) last week in a sign that OPEC+ production cuts engineered by Saudi Arabia are tightening the global oil market.

The 9.6-million-bbl crude draw was about nine times above market expectations and the largest weekly decline in domestic crude oil inventories since the beginning of the year. The outsized drop came despite a 1.4-million-bbl transfer of oil last week from the nation's Strategic Petroleum Reserve and a sharp reduction in refinery run rates.

U.S. refiners processed an average 16.3 million barrels per day (bpd) of crude oil, 215,000 bpd less than in the prior week. Demand for refined fuels also picked up slightly, with four-week average gasoline consumption in the United States jumping to the highest level since December 2021 at 9.3 million bpd.

The bullish inventory report reignited buying interest in the oil complex driven by the outlook for a tighter physical oil market in the second half of the year. Following the OPEC+ announcement on June 4 to extend production cuts through the end 2024 joined with Saudi Arabia's decision to unilaterally cut output by 1 million bpd in July, some analysts forecast global oil inventories will begin gradually falling in each of the next five quarters, putting upward pressure on oil prices.

At settlement, West Texas Intermediate August futures advanced $1.86 per bbl to $69.56 per bbl, and international crude benchmark Brent for August delivery gained $1.78 to $74.03 per bbl. The next-month delivery September Brent contract settled the session with a $0.21-per-bbl premium to the expiring contract, as Brent's backwardation along the forward curve continues to unwind.

NYMEX RBOB July futures advanced $0.0866 to $2.6034 per gallon, with next-month August futures finishing the session at $2.4971 per gallon. NYMEX ULSD July contract edged higher to $2.4067 per gallon, and the August contract gained to $2.3948 per gallon. ICE Brent August, NYMEX RBOB and ULSD July futures expire the afternoon of Friday, June 30.

Further supporting the oil complex was the latest macroeconomic data for the U.S. that showed the economy still has momentum heading into the second half of the year supported by improving consumer sentiment and continued demand for services. The consumer confidence index released by the Confidence Board came in stronger than expected in June, jumping to its highest level since January 2022, as both the present situation and expectations components rose.

"Greater confidence was most evident among consumers under age 35, and consumers earning incomes over $35,000. Nonetheless, the expectations gauge continued to signal consumers anticipating a recession at some point over the next 6 to 12 months," said Dana Peterson, chief economist at The Conference Board.

It must be noted, however, that the index is still well below the levels associated with a healthy economy.

Meanwhile, U.S. durable goods orders climbed for the third straight month in May, up 1.7% from the prior month. The recent increase in orders might be a sign that manufacturers have found a bottom, at least temporarily, after slumping in 2022. Orders rise in an expanding economy and shrink in a contracting one.

In reaction to better-than-expected data released this week, Goldman Sachs raised its U.S. economic growth estimate for the second quarter by 0.4% to 2.2%.

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