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Crude oil futures rose on Wednesday, ending three consecutive sessions of losses, after the United States reported a much larger-than-expected drop in crude inventories last week, the third consecutive decline.
While crude oil inventories fell by 4.9 million barrels, Refineries continue to run at high levels and gasoline and diesel inventories are building despite a decline in capacity utilization along the Gulf Coast where Hurricane Beryl made landfall early last week.
After the July 4 holiday week, gasoline demand fell to 8.8 million barrels per day, down from 9.4 million barrels per day in the previous two weeks.
Gary Cunningham, director of research for traditional energy markets, said the post-holiday week is likely to see “reduced overall travel demand, supporting gains in distillates and gasoline as inflows remain healthy” market observation.
Meanwhile, shares of energy companies (NYSE:XLE) rose as traders pivoted back into sectors that have lagged in recent months.
Morgan Stanley analysts said, “Energy has now reversed some of the weakness relative to oil in June, but the weak outlook for inflation and crude oil balance has limited new investor interest.”
Front-month Nymex crude oil (CL1:COM) for August delivery has been completed +2.6% to US$82.85/barrel, the largest single-day percentage increase since June 10, and settled in front-month September Brent crude oil (CO1:COM) +1.6% to US$85.08/barrel.
U.S. Natural Gas (NG1:COM) once again encountered severe settlement, and the front-month August contract closed -7% to $2.035/MMBtu, which is the lowest settlement price since May 2.
ETF: (New York Stock Exchange: Use), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)
Negative factors such as fewer hot weather days in the near-term forecast, sluggish LNG exports and ample production continue to weigh on the natural gas market, and these factors have combined to cause “a stagnation in the shrinkage of the storage glut, which has been the main source.” According to reports, Ritterbusch analysts said that “the period from May to early June was supportive.”
“While net speculative short positioning is already in bullish territory, there appears to be room for more speculative selling,” Ritterbusch wrote.
