Futures Movers: Oil prices drop despite huge drop in U.S. crude inventories

Posted By: EN Todayon: August 02, 2023In: General Energy News, Oil & Gas News

Oil futures extended losses Wednesday, failing to get a lift after government data confirmed a historic drop in U.S. crude inventories.

Price action

West Texas Intermediate crude for September delivery
CL00,
-2.56%

CL.1,
-2.56%

CLU23,
-2.56%
fell $1.68, or 2.1%, to $79.69 a barrel on the New York Mercantile Exchange.
October Brent crude
BRN00,
-2.24%

BRNV23,
-2.24%,
the global benchmark, dropped $1.51, o4 1.8%, to $83.40 a barrel on ICE Futures Europe.
Back on Nymex, September gasoline
RBU23,
-3.32%
fell 1.8% to $2.818 a gallon, while September heating oil
HOU23,
-1.34%
fell 0.3% to $3.015 a gallon.
September natural gas
NGU23,
-3.24%
was off 3.1% at $2.481 per million British thermal units.

Market drivers

The Energy Information Administration on Wednesday morning reported that U.S. crude inventories dropped by more than 17 million barrels in the week ended July 28. Gasoline inventories, however, rose by nearly 1.5 million barrels, while distillate stocks fell by 800,000 barrels.

Analysts surveyed by S&P Global Commodity Insights, on average, had forecast the EIA to show crude inventories fell 3.7 million barrels last week. Gasoline stocks were expected to show a drop of 1 million barrels, with distillate inventories down 400,000 barrels.

It was the combination of robust crude exports and strong refinery runs that yielded the largest draw to weekly U.S. crude inventories on record, said Matt Smith, lead oil analyst for the Americas at Kpler.

“This is very much a timing issue: peak summer refining activity has coincided with very strong end-of-month exports, and draws of such magnitude should not be expected going forward,” he said.

The American Petroleum Institute, an industry trade group, late Tuesday reported a 15 million barrel drop in U.S. crude inventories last week, according to a source citing the data, while gasoline stocks fell 1.7 million barrels and distillates were down 512,000 barrels.

The API report had signaled a large crude draw, with set up “a case of buying the rumor and selling the fact for WTI,” which headed lower after running into technical resistance, Smith said.

Meanwhile, a Bloomberg survey released Tuesday showed output by the Organization of the Petroleum Exporting Countries, or OPEC, dropped by 900,000 barrels a day in July, the lowest since 2020. Saudi Arabia led the decline with a drop of 810,000 barrels a day, bringing production to 9.15 million barrels a day.

Saudi Arabia previously announced it would extend its production cut of 1 million barrels a day through August. Many analysts said they expect it to announce later this week that the cut will continue through September.