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Oil futures climbed on Wednesday to their highest finish since late April, finding support as a smaller-than-expected rise in U.S. consumer prices helped weaken the dollar and OPEC+ supply cuts continued to point to tighter global crude supplies.
The rise in oil prices came even as the Energy Information Administration reported a weekly gain in U.S. commercial crude inventories of 5.9 million barrels.
Price action
-
West Texas Intermediate crude for August delivery
CL00,
+1.43% CLQ24,
+0.39%
gained 92 cents, or 1.2%, to settle at $75.75 per barrel on the New York Mercantile Exchange. -
September Brent crude
BRN00,
+0.22%
BRNU23,
+0.22%
was added 71 cents, or 0.9%, at $80.11 per barrel on ICE Futures Europe. Brent, as well as WTI, oil marked their highest front-month contract settlements since late April, according to Dow Jones Market Data. -
August gasoline
RBQ23,
+1.99%
gained 1.7% to $2.67 a gallon, while August heating oil
HOQ23,
+0.93%
rose 0.6% to $2.60 per gallon. -
August natural gas
RBQ23,
+1.99%
fell 3.6% to $2.63 per million British thermal units after gaining more than 2% on Tuesday.
Market drivers
Oil prices continued to rise on Wednesday following U.S. data showing consumer prices increased by a modest 0.2% in June and the rate of inflation slowed to 3%, the lowest level since 2021.
Oil traders are focusing more on easing inflation pressures that could result in the Federal Reserve not needing to raise interest rates much further, “meaning that the currently robust economic conditions may be able to continue for a while,” Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.
“This has helped to boost demand expectations, while offshore supply from Saudi Arabia and Russia is still being held back,” he said.
A weaker U.S. dollar can provide support for dollar-denominated prices of oil. In Wednesday dealings, the ICE U.S. Dollar index
DXY,
was down 1.2% at 100.53.
Meanwhile, the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, recently agreed to extend their oil-production cuts through 2024 and Saudi Arabia voluntarily agreed to extend its voluntary production cut through August.
In a monthly report released Tuesday, the Energy Information Administration said it expects global oil supplies to decline over the next five quarters because of those reductions in output.
The market is still dealing with a supply cut from Saudi Arabia, along with the refilling of the U.S. Strategic Petroleum Reserve, said Tariq Zahir, managing member at Tyche Capital Advisors. The U.S. Energy Department said last Friday that it plans to buy about 6 million barrels of oil for the nation’s oil reserve, following the historic drawdown of 180 million barrels announced by the Biden administration in the spring of 2022.
In addition, there’s been a quiet start to the Atlantic hurricane season, which began on June 1, but that “could change at a moment’s notice,” said Zahir.
The U.S. consumer-price index came in weaker than expected and bond yields also weakened, allowing “risk assets to catch a bid,” he told MarketWatch. The CPI data also caused weakness in the dollar, providing “strength in the energy complex.”
Supply data
Gains for oil prices came even as the EIA on Wednesday reported that U.S. commercial crude inventories climbed by 5.9 million barrels for the week ending July 7.
On average, analysts polled by S&P Global Commodity Insights expected the report to show a decline of 1 million barrels. The American Petroleum Institute, a trade group, had reported late Tuesday that domestic crude supplies rose by 3 million barrels last week, according to sources citing the data.
The EIA inventory data showed an increase in crude supplies when a decline was expected, said Zahir, but supply cuts, a weaker U.S. dollar, hurricane season — “all of these factors … will keep a bid to crude oil in the days and weeks ahead.”
The EIA report showed weekly inventories of gasoline were generally unchanged last week, while distillate supplies increased by 4.8 million barrels. Analysts had forecast a weekly fall of 1.1 million barrels for gasoline and an increase of 150,000 barrels for distillates.
Crude stocks at the Cushing, Okla., Nymex delivery hub fell by 1.6 million barrels for the week, the EIA said, while stocks in the SPR edged down by 400,000 barrels.
The EIA data continue to “point to weakness in U.S. refined product demand,” particularly distillate fuel oil demand, said Troy Vincent, senior market analyst at DTN. “This is a reflection of the sharp deceleration in industrial and manufacturing activity as well as global trade and freight.”
