Oil prices fall despite surprise drop in U.S. crude inventories as gasoline demand picks up


Oil futures dropped gains on Wednesday, falling despite data showing an unexpected drop in U.S. crude oil stocks and a sharp new drop in gasoline supplies.

The downturn in crude oil came as equity markets plummeted, erasing a large rebound on Tuesday and affecting demand for other assets that were perceived as risky.

Price action
  • West Texas Intermediate Crude for June Delivery CL.1,
    -1.77%

    CL00,
    -1.77%

    CLM22,
    -1.77%
    it fell $ 1.51, or 1.3%, to $ 110.89 a barrel.

  • July Brent crude BRN00,
    -1.79%

    BRNN22,
    -1.79%,
    the global benchmark index fell $ 1.57, or 1.4%, to $ 110.38 a barrel on ICE Futures Europe.

  • June gasoline RBM22,
    -3.69%
    it fell 2.9% to $ 3.8282 a gallon. June HOM22 diesel heating,
    -3.21%
    decreased 2.6% to $ 3.7012 per gallon.

  • June NGM22 natural gas futures,
    -0.48%
    they remained virtually unchanged at $ 8.30 per million British thermal units.

What drives the markets?

The Energy Information Administration said U.S. crude stockpiles fell 3.4 million barrels in the week ending May 13, while gasoline inventories fell 4.8 million barrels and distillate supplies increased by 1.2 million barrels. Analysts surveyed by S&P Global Commodity Insights had expected a 2.1 million barrel increase in oil stocks, while gasoline was expected to drop 100,000 barrels and distillates were expected to drop 1 million barrels.

The American Petroleum Institute, a trade group in the industry, reported Tuesday afternoon that U.S. crude stockpiles fell 2.4 million barrels last week, while gasoline inventories fell by 5, 1 million barrels, according to a source. Distillate stocks rose 1 million barrels.

“Despite a 5 million barrel release of the SPR, higher production and stronger imports, stronger refining activity and crude oil exports have encouraged the reduction of (crude) inventories,” said Matt Smith, an analyst. main oil for the Americas in Kpler, in an email.

Crude oil extraction “coupled with a sharp drop in gasoline inventories, as implicit demand rose again above 9 [million barrels a day] during the first week of fourteen. Distilled implicit demand also showed slightly higher, but inventories still showed a small accumulation, “he said.

US stocks fell sharply, with the Dow Jones Industrial Average DJIA
-2.28%
falling more than 650 points, or 2%, while the S&P 500 SPX,
-2.74%
dropped 2%.

Earlier gains in crude oil prices were partly tied to hopes of easing restrictions on COVID in China, the world’s largest importer of crude oil, analysts said. Optimism over “much higher oil demand and prices” is positive for producers, albeit detrimental to consumer sentiment, wrote Stephen Innes, managing partner of SPI Asset Management, in a note to clients.

“And with unattainable prices at the pump, which are a by-product of demand exceeding supply, the Fed will be tasked with raising rates to at least moderate the demand side of the economy, which could eventually filtering into a mild form of demand destruction where there could be a buyer strike instead of blurring buyers during the high driving season in the United States, “he said.

UK data on Wednesday showed annual consumer prices were hovering at a four-decade high, driven by higher energy prices.

Crude oil has been pushing the upper end of its trading range for the past few weeks, Ole Hansen, head of commodity strategy at Saxo Bank, said in a note to clients on Wednesday.

“In recent weeks, attention has shifted from a limited crude oil market to a product market where the cost of gasoline, diesel and aircraft fuel has risen to unprecedented levels. In years, if ever, the combination of refinery maintenance, a reduction in capacity after the pandemic and the self-sanctioning of Russian products have led to incredible markets, “said Hansen.



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