By Barani Krishnan
Investing.com - Oil prices rose on Wednesday as traders focused on government data showing a huge drawdown in U.S. gasoline stockpiles last week, while sweeping aside an equally stunning, unexpected build in crude inventories.
“Between the two evils, the bulls, of course, decided to go with the one that worked for them — the gasoline draw that came on the back of the 4th of July holiday,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. “The big question is what happens from tomorrow, as there’s no more momentous occasion to help demand for a long time.”
New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled up 28 cents, or 0.7%, at $40.90 per barrel.
London-traded Brent, the global benchmark for oil, rose 21 cents, or 0.5%, to settle at $43.29.
Crude prices rose as traders took heed of the 4.8 million-barrel drawdown in gasoline stockpiles reported by the Energy Information Administration for the week ended July 3, versus the average drop of just 20,000 barrels forecast by analysts.
But the EIA also reported that crude stockpiles rose by a staggering 5.65 million barrels.
Additionally, crude inventories at the Cushing, Oklahoma, storage facility for oil delivered against contracted WTI barrels rose 2.2 million barrels, more than the 1.5 million barrels forecast by analysts.
Conversely, analysts followed by Investing.com had forecast a crude draw of 3.1 million barrels for last week to follow through with the previous week’s 7.1 million-barrel slide. The build of nearly 5.7 million barrels instead for last week completely turned their projections on the head.
That wasn’t the full bearish picture yet. Distillates inventories came in 3.1 million barrels higher versus the previous week’s draw of 593,000. Analysts had expected another modest decline of 75,000 barrels last week.
U.S. oil production, meanwhile, stayed put at an estimated 11 million barrels per day, indicating that the huge slides in output seen between March and April during the height of the coronavirus pandemic was practically over. The United States produced a record high 13.1 million barrels daily in mid-March before demand destruction triggered by Covid-19 forced drillers in U.S. shale oil patches to slash operating rigs and shut in some wells.
The virus itself is experiencing a new wave in the United States, with some 40,000 new infections being reported daily.Top U.S. pandemics expert Anthony Fauci warned recently that the daily case growth could reach 100,000 without proper social-distancing and other safety measures.
Data shows that some 3 million Americans have already been infected by Covid-19, with a death toll exceeding 133,000. A new model by the University of Washington also predicts 200,000 coronavirus deaths in the United States by Oct. 1, casting further doubts on economic reopening from lockdowns.
“Now past the peak of the summer driving season, investors are skeptical that demand for oil will improve much as the coronavirus continues to hurt demand in some key driving states and as airlines take back some of their optimism on flight increases,” said Ed Moya at New York-based OANDA.