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Oil futures climbed on Wednesday, with prices looking to post their first gain in four sessions, as U.S. government data show declines in domestic crude and gasoline supplies.
Traders also debated the impact of the Biden administration’s plan to release more crude from the Strategic Petroleum Reserve.
Price action
-
West Texas Intermediate crude for November delivery
CL.1,
+1.23% CLX22,
+1.23%
rose 42 cents, or 0.5%, to $83.24 a barrel on the New York Mercantile Exchange, ahead of the contract’s expiration at the end of Thursday’s session. December WTI
CL00,
+1.11% CLZ22,
+1.11% ,
the most actively traded contract, rose 42 cents, or 0.5%, to $82.49 a barrel. -
December Brent crude
BRN00,
+1.27% BRNZ22,
+1.27% ,
the global benchmark, was up 49 cents, or 0.5%, at $90.50 a barrel on ICE Futures Europe. -
Back on Nymex, November gasoline
RBX22,
+1.96%
rose 0.6% to $2.5676 a gallon, while November heating oil
HOX22,
-2.12%
shed 3.2% to $3.8666 a gallon. -
November natural gas
NGX22,
-3.17%
fell 3.9% to $5.519 per million British thermal units.
Market drivers
Oil futures were attempting to snap a three-day losing streak, with losses on Tuesday attributed in part to expectations that had been building around a release of further crude from the Strategic Petroleum Reserve by the Biden administration.
The market is still digesting that news, but it’s a “non-event given it is the final part of the 180 million-barrel release to hit the market,” said Matt Smith, lead oil analyst, Americas, at Kpler.
“What is more newsworthy is the wide range of tools that the administration is considering to keep gas prices in check — further SPR releases, a crude export ban, limiting clean product exports — a reflection of the government’s fixation on prices at the pump, and its apparent influence on mid-terms,” he said.
Read: Why you can’t count on another SPR oil release to cut gasoline prices at the pump
Administration officials late Tuesday confirmed that President Joe Biden on Wednesday would announce the release of 15 million barrels of oil from the U.S. strategic reserve Wednesday as part of a response to recent production cuts announced by OPEC+ nations. He will also say more oil sales are possible this winter, as his administration rushes to be seen as pulling out all the stops ahead of next month’s midterm elections. The move will complete the release of 180 million barrels of crude announced by Biden in March.
“Brent was down around 10% from just over a week ago at one stage on Tuesday; a sign of how concerned traders are about the economic outlook and how serious the Biden administration is about using the SPR to drive prices lower ahead of the midterms,” said Craig Erlam, senior market analyst at Oanda, in a note.
With Brent stabilizing around $90 and WTI between $80 and $85, you have to wonder how OPEC+ countries will feel about how the markets are positioned and whether further cuts could be considered,” he wrote.
In the medium term, the impact of additional SPR releases will likely have “diminishing returns” with the SPR at a multi-decade low, said Stephen Innes, managing partner at SPI Asset Management.
Supply data
On Wednesday, the Energy Information Administration reported declines in domestic crude and gasoline inventories, providing support to oil prices.
U.S. crude inventories fell by 1.7 million barrels for the week ended Oct. 14, according to the EIA.
On average, analysts forecasted a decrease of 1.2 million barrels, according to a poll conducted by S&P Global Commodity Insights. The American Petroleum Institute, an industry trade group, late Tuesday said U.S. crude inventories fell by 1.27 million barrels last week, according to a source who cited the figures.
The fall in crude supplies came even as stocks in the SPR fell 3.6 million barrels to 405.1 million barrels last week, data show. Crude stocks at the Cushing, Okla., Nymex delivery hub edged up by 600,000 barrels.
“A smaller SPR release, much stronger exports and a dip in imports have encouraged a minor draw to crude inventories,” said Kpler’s Smith.
This week’s report is “fairly benign,” although implied gasoline demand continues to “seemingly face headwinds,” down 6.4% year on year on the four-week average, he said in emailed comments.
The EIA also reported a weekly inventory decline of 100,000 barrels for gasoline, while distillate stockpiles edged up by 100,000 barrels. The analyst survey had called for decreases of 2.2 million barrels for gasoline and 2.5 million barrels for distillates.
