Crude Oil Jumps on Surprising Decline in Weekly US Supplies

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Crude oil prices posted modest gains in the middle of the trading week after the US government reported a better-than-expected drop in domestic inventories. But with a sudden increase in the oil rig count and concerns over the COVID-19 public health crisis impacting fuel demand, could oil prices test $42 to $43 this year?

September West Texas Intermediate (WTI) crude oil futures advanced $0.27, or 0.66%, to $41.31 per gallon at 15:32 GMT on Wednesday on the New York Mercantile Exchange. US crude has taken a breather in recent sessions, falling nearly 2% over the last week. Year-to-date, crude prices are down more than 32%.

Brent, the international benchmark for oil prices, is also gaining midweek. October Brent crude futures tacked on $0.41, or 0.94%, to $44.02 per gallon on London’s ICE Futures exchange. Brent has also been sluggish, but it is up nearly 5% this month. So far this year, Brent princes have declined 33%.

According to the US Energy Information Administration (EIA), domestic crude oil stockpiles decreased by 10.6 million barrels for the week ending July 24. This beat the market forecast for a drop of 6.8 million barrels. Crude inventories at the Cushing, Oklahoma storage facility rose by 1.3 million barrels.

Gasoline inventories increased by 700,000 barrels, while distillate supplies jumped by 500,000 barrels.

Last week, the Baker Hughes total oil rig count edged up by one to 181. The total rig count dropped from 253 to 251. Because the downward trend had slowed down, some investors are concerned that oil and gas firms could reignite operations to take advantage of rising crude prices. In the US, companies need prices to range between $40 and $50 to be profitable.

The coronavirus pandemic does not appear to be fading away in the US as health authorities have seen new hotspots and places with rising cases. This has sparked worries over declining fuel demand as global crude markets remain oversupplied. If the number of infections continues to increase, this could lead to a return to restrictions that would impact consumer and industrial demand.

In other energy commodities, September natural gas futures picked up $0.007, or 0.38%, to $1.871 per million British thermal units. September gasoline futures slipped $0.0154, or 1.18%, to $1.2206 a gallon. September heating oil futures tacked on $0.0124, or 0.99%, to $1.2618 per gallon.

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