US crude oil futures touched $76 in the middle of the trading week, despite a larger-than-expected build in domestic inventories. Energy commodities have been climbing in the last week, buoyed by upwardly revised demand forecasts and tighter global inventories. Is this a head-fake as we have seen in the last few months, or could this be the beginning of another bull run?
September West Texas Intermediate (WTI) crude futures surged $1.17, or 1.56%, to $76.00 per barrel at 19:09 GMT on Wednesday on the New York Mercantile Exchange. WTI crude is already up nearly 6% this week and has pared its year-to-date decline to below 6%.
Brent, the international benchmark for oil prices, topped $80 midweek. October Brent crude futures advanced $0.26, or 0.32%, to $80.37 a barrel on London’s ICE Futures exchange. Brent is up 5% this week and has risen nearly 10% in the past month. Year-to-date, Brent has tumbled 6.5%.
According to the US Energy Information Administration (EIA), domestic inventories of crude oil soared 5.946 million barrels for the week ending July 7, up from the previous week’s drawdown of 1.508 million barrels. This was also greater than the consensus estimate of 483,000 barrels.
Gasoline inventories were flat, heating oil stockpiles increased by 439,000 barrels, and distillate stocks surged by 4.815 million barrels.
This comes after the American Petroleum Institute reported a supply build of 3.026 million barrels.
Despite higher supplies, market analysts say that investors are focusing on easing inflation pressures that could prompt the Federal Reserve to reconsider its two rate hikes this year and perhaps pull the trigger on just one more rate increase.
In addition, oil prices continue finding support from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, recently agreeing to extend their output cuts through 2024.
This is troubling news as the EIA projected that international oil supplies would decline over the next five quarters due to reductions in production.
A weaker greenback further lifted crude prices as the US Dollar Index (DXY), a measurement of the buck against a basket of currencies, plummeted 1.17% to 100.53. A lower greenback is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.
In other energy markets, September natural gas futures fell $0.08, or 2.97%, to $2.612 per million British thermal units (Btu). September gasoline futures added $0.0521, or 1.99%, to $2.6748 a gallon. September heating oil futures tacked on $0.0277, or 1.07%, to $2.6114 per gallon.