Crude oil futures are extending their gains in the middle of the trading week after the US government reported a larger-than-expected withdrawal in domestic inventories. Global production levels have been at the forefront of the recent rally in oil prices. Could US crude touch $100 again?
September West Texas Intermediate (WTI) crude oil futures rose $0.76, or 0.81%, to $94.50 per barrel at 15:29 GMT on Wednesday on the New York Mercantile Exchange. WTI prices have surged more than 8% over the last week, adding to their year-to-date rally of more than 25%.
Brent, the international benchmark for oil prices, topped $10 midweek. October Brent crude futures added $0.43, or 0.43%, to $100.65 a barrel on London’s ICE Futures exchange. Brent has also surged about 8% over the last week, lifting its year-to-date jump to around 24%.
According to the US Energy Information Administration (EIA), domestic inventories of crude oil declined 3.282 million barrels in the week ending August 19, higher than the market forecast of a 933,000-barrel drawdown. This was also the second straight week of a supply drop.
Supplies at the Cushing, Oklahoma storage facility rose 426,000. Gasoline supplies dipped by 27,000 barrels, while distillate stockpiles fell 661,000 barrels. Heating oil stocks advanced 845,000 barrels. Gasoline production decreased 536,000 barrels, while distillate fuel output edged up 22,000 barrels.
Oil prices had plunged on news that the West was close to reaching a nuclear deal with Iran to allow Tehran to boost crude exports and flood the global market with as much as 1.3 million barrels per day of crude. However, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman suggested that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, could slash output amid recession fears. The Saudis also noted that the Kingdom would slash production if Iran were allowed to seek nuclear ambitions.
“While progress on the Iranian nuclear deal still seemed positive, up to nine OPEC+ members confirmed they would support production cuts if Iranian supply came back online or if the global economy entered a recession, fueling the rally,” noted analysts at Deutsche Bank.
Meanwhile, the US Strategic Petroleum Reserve (SPR) has slumped to a 35-year low. President Joe Biden’s six-month plan to withdraw from the emergency reserves will soon be up, so investors will monitor how much this will impact energy markets.
In other energy commodities, September natural gas futures rose $0.032, or 0.35%, to $9.225 per million British thermal units (Btu). September gasoline futures plunged $0.113, or 4.11%, to $2.6355 a gallon. September heating oil futures soared $0.111, or 2.92%, to $3.9122 per gallon.