DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange advanced in pre-inventory trade Wednesday in reaction to the preliminary report from the American Petroleum Institute showing domestic crude oil inventories plummeted by more than 15 million bbl last week, while also detailing larger-than-expected drawdowns in refined fuels stockpiles.

Further details of the API report revealed commercial crude oil inventories declined by 15.4 million bbl during the week-ended July 28 -- far above calls for a draw of 1.3 million bbl. If confirmed by official data from the US Energy Information Administration, this would be the largest drawdown from crude oil inventories so far this year. Currently, commercial crude oil inventories sit around 2% above the five-year average.

Stocks at the Cushing, Oklahoma tank farm, the New York Mercantile Exchange delivery point for West Texas Intermediate futures, also dropped 1.76 million bbl. In the gasoline complex, the API data detailed a 1.68 million bbl drawdown from nationwide gasoline inventories as of July 28, also above calls for a 1.3 million bbl draw. Nationwide, gasoline inventories stand around 7% below the five-year average at 217.6 million bbl after a sustained destocking pattern for four straight weeks. Distillate inventory fell 512,000 bbl, more than five times the expected 100,000 bbl decrease. U.S. distillate inventories currently sit almost 14% below the five-year average. Next, oil traders will turn focus to official inventory data from the U.S. Energy Information Administration scheduled for a 10:30 a.m. ET release.

Further lifting the oil complex is a softer U.S. dollar index which slid 0.04% against the basket of foreign currencies to trade near a three-week high 102.040 after a slew of dismal Eurozone manufacturing data, where all signs point to a protracted recession in the second half of the year. The headline manufacturing index for the German economy slid last month to the lowest level since May 2020, reflecting weak demand conditions for a broad category of consumer goods, showed data released by S&P Global overnight.

German and European manufacturers broadly reported challenges in securing new work across many key export markets in Asia and the United States. This was reflected in a sharp and accelerated reduction in international sales.

Domestically, the manufacturing sector did not fare much better, with the headline Purchasing Managers Index released this morning by the Institute of Supply Management revealing business conditions across all but one large industry remained in contraction.

"Current U.S. market conditions of inflationary and recessionary tactics affecting overall business. Customers are reducing or not placing orders as forecast, putting internal focus on reducing financial liabilities and overhead costs," said a representative from the Computer and Electronic Products sector surveyed by ISM.

"Sales in our industry are extremely slow entering into the second half of the year, and no upturn is expected until at least the fourth quarter," assessed a representative from the Chemical Products industry.

Near 7.45 AM ET, West Texas Intermediate September futures on NYMEX climbed $0.50 bbl to a fresh 15-month high $81.86 bbl, while the new front-month October Brent contract advanced $0.45 to $85.35 bbl. NYMEX September RBOB futures moved $0.0225 higher to $2.8947 gallon, while the September ULSD contract on NYMEX advanced to a fresh six-month high $3.0614 on the prompt continuous chart, up $0.0380 gallon.

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