By Myra P. Saefong and William Watts
WTI crude oil futures due next month settle at their highest level since mid-April
Oil prices closed higher on Wednesday in light trading volume ahead of the Independence Day holiday after official U.S. data showed a drop of more than 12 million barrels in crude inventories and a weekly rise in implied gasoline demand.
Price movements
West Texas Intermediate crude CL00 for August delivery CL.1 CLQ24 rose $1.07, or 1.3 percent, to settle at $83.88 a barrel on the New York Mercantile Exchange. Forward-month prices closed at their highest since April 16, according to Dow Jones Market Data. Brent crude for September delivery BRN00 BRNU24, the global benchmark, rose $1.10, or 1.3 percent, to settle at $87.34 a barrel on ICE Futures Europe, the highest since April 30. August gasoline RBQ24 gained 1.1 percent to $2.60 a gallon, while August heating oil HOQ24 added 0.2 percent to $2.63 a gallon. Natural gas for August delivery settled at $2.42 per million British thermal units, down 0.7 percent.
Market indicators
With the market in the midst of a holiday-shortened trading week in the U.S., Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch he was not surprised to see lighter volume and a lack of direction for oil during part of the session.
However, it should be noted that "we are in hurricane season and the situation in the Middle East could worsen at any moment," he warned.
Read: Hurricane Beryl puts oil in focus, climate change likely to intensify storms
Oil prices closed solidly higher on Wednesday after the Energy Information Administration reported that U.S. crude inventories fell by a larger-than-expected 12.2 million barrels during the week ending June 28.
Strategists at Macquarie had forecast a 10.9 million barrel drop in crude supplies. The American Petroleum Institute reported a 9.16 million barrel decline on Tuesday, according to sources.
"Strong exports, a slight drop in imports and a rebound in refinery throughput conspired to reduce crude inventories by a whopping 12 million barrels," said Matt Smith, chief U.S. analyst at Kpler.
The EIA also reported weekly inventory declines of 2.2 million barrels of gasoline and 1.5 million barrels of distillate. Strategists at Macquarie had forecast declines of 1.2 million barrels of gasoline and 2.3 million barrels of distillate.
Total motor gasoline supplies, a gauge of demand, rose to 9.424 million barrels per day from 8.969 million bpd in the latest week, EIA data showed.
Both gasoline and distillates showed declines despite higher refinery usage, with implied demand higher for both, particularly gasoline, "as gas stations stocked up ahead of the Independence Day holiday weekend," Smith said.
The price of gasoline, at about $3.50 a gallon on average nationwide, slightly below last year, is "good enough to encourage a record number of road trips," he said.
Indeed, strong expectations for U.S. travel demand this week around the Independence Day holiday, which falls on Thursday, have provided some support for crude, analysts say. AAA expects record car travel over the holiday period.
The Department of Energy announced Tuesday that contracts have been awarded for the previously announced sale of 1 million barrels of gasoline from the Northeast Gasoline Supply Reserve. They were sold at an average price of $2.34 a gallon, aimed at helping to lower gasoline prices ahead of the July 4 holiday.
Prior to the release of the oil supply data, oil prices had been searching for direction.
Some of the volatility seen in oil prices early Wednesday was likely related to Hurricane Beryl, as the storm could impact some production facilities in the western Gulf of Mexico, Gary Cunningham, director of market research at Tradition Energy, told MarketWatch.
However, the latest update on Beryl's trajectory continues to indicate that it will remain "south and west of the heart of Gulf of Mexico production, so unless that changes, we should not see any significant impact."
Crude oil prices closed lower on Tuesday after updated forecasts indicated Hurricane Beryl would weaken substantially before threatening the U.S. Gulf Coast, reducing the risk of major production shutdowns. Wednesday's forecasts show the storm will miss most offshore drilling platforms in the Gulf of Mexico on its current path.
In other energy news, the EIA reported Wednesday that U.S. stored natural gas supplies rose by 32 billion cubic feet during the week ending June 28. Analysts on average are forecasting an increase of 34 billion cubic feet, according to S&P Global Commodity Insights.
The data, which was released a day earlier than usual because of Thursday's holiday, included upward "revisions" to previous data, the EIA said. The revisions led to the implied net change in stocks for the week ended June 21 rising to 3.102 trillion cubic feet from 3.097 trillion cubic feet.
-Myra P. Saefong-William Watts
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07-03-24 1524ET
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