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Crude Oil looks to extend multiday rally as U.S. crude supply drops

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August 22nd, 2018

Crude-oil futures traded sharply higher Wednesday, after data showed a sharper-than-expected decline in U.S. crude inventories, supporting a multisession run of price gains.

West Texas Intermediate oil for October delivery CLV8, +3.14% on its first full session as a front-month contract, rose $1.48, or 2.3%, to $67.32 a barrel on the New York Mercantile Exchange. Meanwhile, October Brent crude LCOV8, +2.75% the global benchmark, traded $1.57, or 2.2%, higher at $74.20 a barrel on the ICE Futures Europe exchange.

The Energy Information Administration reported Wednesday that domestic crude supplies fell by 5.8 million barrels for the week ended Aug. 17. Analysts surveyed by S&P Global Platts had forecast a fall of about 3.4 million barrels, while the American Petroleum Institute on Tuesday reported a decline of 5.2 million barrels.

“As refinery runs continue to kick around close to a record high—easing just 89,000 [barrels per day] last week—and as imports have dropped off on the prior week, crude inventories have shown a solid draw, particularly on the U.S. Gulf Coast,” said Matt Smith, director of commodity research at ClipperData. “Refinery runs are up 431,000 bpd versus year-ago levels. With runs elevated, builds were seen to both gasoline and distillates.”

Gasoline stockpiles climbed by 1.2 million barrels for the week, while distillate stockpiles added 1.8 million barrels, according to the EIA. The S&P Global Platts survey forecast a supply decrease of 400,000 barrels for gasoline, along with a climb of 2 million barrels for distillate stocks.

On Nymex, September gasoline RBU8, +2.28%  added 2% to $2.059 a gallon and September heating oil HOU8, +2.19%  tacked on 1.9% to $2.164 a gallon.

Meanwhile, the EIA data also revealed that U.S. crude production climbed by 100,000 barrels to 11 million barrels a day last week. It’s up by nearly 1.5 million barrels from the same time a year ago.

Still, both grades of crude oil have enjoyed a multisession streak of gains, on track for a fifth straight session rise, based on the front-month contracts according to FactSet data, on anticipated supply concerns as investors have been expecting a series of U.S. sanctions against Iran to eventually remove as many as 1 million to 1.5 million barrels of oil a day from global oil supplies.

“I believe that it is very likely that the price of oil may have put in its low price for the year. Barring any shock headlines or economic catastrophes, the technical seasonal outlook and the fundamentals suggest that the downside correction in oil should be over,” wrote Phil Flynn, senior market analyst at Price Futures Group in a Wednesday research note, ahead of the supply data.

Separately, investors eyed the resumption of negotiations on Wednesday between Beijing and Washington to end their protracted tariff clash, which market participants fear could roil global markets and accelerate an economic slowdown in China—bearish factors for oil demand should they manifest.

In other energy dealings, September natural gas NGU18, -0.37%  was down 0.3% at $2.97 per million British thermal units, with the EIA set to report its weekly U.S. data on supplies of the fuel Thursday.

 - MarketWatch.

See Also: Crude Oil News Blog, Crude Oil Futures, Natural Gas Futures, Heating Oil Futures, Unleaded Gas Futures, Ethanol Futures, Gasoline Blendstock Futures