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Oil futures climbed on Thursday, with prices headed up for a third straight session to likely their highest finish since July.
Oil found support after data on Wednesday revealed a drop in U.S. crude inventories to their lowest level since 2018, along with strong refinery demand, as offshore crude production continued to see a slow recovery in the Gulf of Mexico in the wake of Hurricane Ida, which made landfall on the Louisiana coast on Aug. 29.
It’s typical to see crude supply declines at this time of year, and supply to slowly come back from previous disruptions, Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch. Several forecasts also call for a much colder winter in several areas, he said, which could lift demand for energy.
However, the situation in China regarding property giant Evergrande is “still playing out,” he said. “With China such a large consumer of energy, this could hurt [its] economy.”
There’s also continued worries tied to the COVID-19 delta variant, so there are “risks to the downside for energy markets,” said Zahir. Even so, energy prices may stay at current levels, or “even grind higher if these risks to not materialize.”
In Thursday dealings, West Texas Intermediate crude for November delivery
CL00,
CLX21,
the U.S. benchmark, was up 91 cents, or 1.3%, at $73.14 a barrel on the New York Mercantile Exchange. November Brent crude
BRN00,
BRNX21,
the global benchmark, added 69 cents, or 0.9%, to $76.88 a barrel on ICE Futures Europe.
WTI and Brent crude were both on track to settle at their highest prices since July, FactSet data show.
Oil jumped 2% Wednesday after the Energy Information Administration reported that U.S. crude inventories fell for a seventh straight week.
The drop took total U.S. crude oil inventories to just below 414 million barrels, the lowest since October 2018, noted Warren Patterson, head of commodities strategy at ING. And while U.S. output rose by 500,000 barrels a day over the week to 10.6 million barrels a day, it’s still well below the 11.5 million barrels a day seen before Hurricane Ida, he said, while data shows refiners continue to recover at a quicker pace than producers after the storm.
On Thursday, October gasoline
RBV21,
added 0.5% to $2.135 a gallon and October heating oil
HOV21,
rose 0.8% to $2.230 a gallon.
Crude was also lifted as equities and other assets perceived as risky were boosted on relief over the lack of any hawkish surprises from the Federal Reserve on Wednesday, as it signaled it could announce the scaling back of its monthly asset purchases as early as November, said analysts at Sevens Report Research, in their latest newsletter.
Worries around China’s Evergrande — which sank oil, equities and other assets perceived as risky on Monday — faded for now, after the People’s Bank of China made large liquidity injections into the financial system, helping ease fears of spillover effects from a possible default.
“Looking past the near-term noise of broad market volatility, the outlook for the
energy markets remains favorable as long as no new contagion fears like we saw with Evergrande trigger another wave of broad risk-off money flows, as demand is
seen steady amid an ongoing economic recovery while the supply outlook remains stable given a disciplined group of OPEC+ members,” analysts at Sevens Report Research wrote.
Also on Nymex, natural-gas futures held onto the bulk of their early gains after the U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 76 billion cubic feet for the week ended Sept. 17. That was larger than the average increase of 70 billion cubic feet forecast by analysts polled by S&P Global Platts.
October natural gas
NGV21,
rose 7.9 cents, or 1.6%, to $4.884 per million British thermal units. Prices were at $4.902 shortly before the data.
