Oil Prices Slump for Quarter Despite Strong U.S. Draws

Investing.com -- U.S. crude stockpiles fell by 2 million barrels last week, defying trade expectations for a build, but long investors in the commodity still lost almost 6% for September.

Analysts tracked by Investing.com had expected a build of 1.57 million barrels for the week ended Sept. 25. But data released by the Energy Information Administration showed a draw instead.

Eight of the previous nine weeks of inventories reported by the EIA had seen drawdowns.

The positive draws in U.S. crude, however, did not translate into monthly returns for long-only investors in the commodity. 

New York-traded West Texas Intermediate, the key indicator for U.S. crude price, settled the day up 93 cents, or 2.4%, at $40.22.

For September, WTI lost 5.6%, though for the third quarter, it rose 2.4%.

London-traded Brent crude, the global benchmark for oil, fell 8 cents, or 0.2%, to settle the day at $40.95. Brent lost 9.6% for September and 0.5% for the third quarter.

Traders have been watching weekly inventory trends in U.S. crude for signs that demand was picking up after months of business lockdowns due to the COVID-19. On Tuesday, the industry's own estimate said oil stockpiles fell by 831,000 barrels last week.

Crude stored at Cushing, Oklahoma, fell by 1.5 million barrels to stand at 263.5 million, the EIA said.

“Once again, the EIA seems to have come to the ‘rescue’ of the oil bulls by estimating a draw for last week versus the build anticipated by the market,” said Investing.com analyst Barani Krishnan. “And to sort of ‘sweeten’ the deal further, you also have a bigger drop in distillate inventories versus forecasts.”

“Yet, crude prices aren’t rallying hard on these numbers, and it’s not just because of the surprise gasoline build. The market is fixated almost wholly on the new explosion of coronavirus cases in the U.S. and Europe and what that could do to demand.”

And while the surprise crude draw, in itself, was encouraging, he pointed to the outflow of nearly two million barrels from the Strategic Petroleum Reserve, which he said, “kind of offsets the headline number everyone’s looking at”.

“If you ask me, the real positive takeaway from this is the rise in exports by nearly 500,000 barrels per day from the previous week. But, of course, that’s not getting too much of the market’s attention.”