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Crude oil futures jumped more than 2% Wednesday, continuing to bounce off YTD lows reached in the rout of global equities, boosted by a bigger than expected drawdown in U.S. crude oil stocks while traders remained on edge over the possibility of a retaliatory strike from Iran on Israel.
U.S. commercial crude oil inventories fell by a much larger than expected 3.7M barrels to 429.3M barrels in the week ended August 2, a sixth straight weekly decline, and were ~6% below the five-year average for the time of year, the Energy Information Agency reported.
“The story here really is that demand is stronger than people thought and overall supplies are tighter,” Price Futures Group analyst Phil Flynn said, according to Reuters.
Gasoline stocks, however, increased by 1.3M barrels, and distillates added 900K barrels, the EIA said, while analysts had expected both figures to decline.
“The streak of draws to a multi-month storage low is responsible for the big bid in the WTI spread, [but] the builds in gasoline and distillate [inventories] are especially concerning considering the refinery utilization rate is only operating at 90.5% of capacity vs. 93.8% of capacity same time last year,” Mizuho analyst Robert Yawger said, according to Dow Jones.
Supporting the bearish demand view, Chinese data showed July daily crude oil imports fell to the lowest level since September 2022.
Front-month Nymex crude (CL1:COM) for September delivery finished +2.7% to $75.23/bbl, and front-month October Brent crude (CO1:COM) closed +2.4% to $78.33/bbl.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (USOI)
Donald Trump said he would immediately fill up the U.S. Strategic Petroleum Reserve if he becomes president in November, a move that could hike oil demand by hundreds of millions of barrels.
The SPR contained 375M barrels of oil, just over half its capacity and its lowest level since 1983, as of July 26, and returning the reserve to roughly the levels seen during Trump’s presidency would require the U.S. to buy nearly 300M barrels of crude.
President Biden has been “using the strategic reserves, which is meant for military, which is meant for war and very important things, he’s using it to try to keep gasoline prices down” in an election year, Trump said in an interview with Fox News.
The U.S. has moved to refill the SPR in recent weeks, taking advantage of a lull in oil prices; the Department of Energy said last week it had bought another 4.65M barrels.