Crude oil futures rose Wednesday, finding support after U.S. government data revealed that U.S. inventories declined for a seventh week in a row, but traded off the session’s high as gasoline stockpiles unexpectedly climbed.
Overall, the report was bullish, but crude supplies are “only going to get worse in the coming weeks” because inventories are “stretched and refiners are coming on back faster than supply of crude oil in the Gulf of Mexico,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.
“Gasoline inventories were up but that normally happens at this time of year,” so it’s partly seasonal and partly because of data that has been skewed due to Hurricane Ida,” he said.
Still, the market should be concerned about the tightness in distillate supplies, which “could create a squeeze as we get into winter,” said Flynn.
West Texas Intermediate crude for November delivery rose 98 cents, or 1.4%, to $71.46 a barrel on the New York Mercantile Exchange. November Brent crude, the global benchmark, was up $1.05, or 1.4%, at $75.41 a barrel on ICE Futures Europe.
The Energy Information Administration reported on Wednesday that U.S. crude inventories fell by 3.5 million barrels for the week ended Sept. 17. That compared with the average decline of 3.8 million barrels expected by analysts polled by S&P Global Platts forecast. The EIA had reported crude supply declines in each of the previous six weeks.
The American Petroleum Institute, an industry group, reported late Tuesday that U.S. crude supplies fell by 6.1 million barrels for the week.
The EIA, however, also reported a weekly inventory increase of 3.5 million barrels for gasoline supplies, while distillate stockpiles were down by 2.6 million barrels. The S&P Global Platts survey had forecast supply decreases of about 900,000 barrels for gasoline and 1.4 million barrels for distillates.
On Nymex, October gasoline tacked on 0.2% to $2.11 a gallon and October heating oil rose 1.2% to $2.20 a gallon.
The EIA data also showed crude stocks at the Cushing, Okla., storage hub edged down by 1.5 million barrels for the week. However, total domestic petroleum production climbed by 500,000 barrels to 10.6 million barrels per day last week.
Oil and natural-gas production in the Gulf of Mexico has been slow to recover in the wake of Hurricane Ida, which made landfall on the Louisiana Gulf Coast on Aug. 29.
The Bureau of Safety and Environmental Enforcement late Tuesday estimated 16.6% of Gulf oil production remains shut in, equal to 320,909 barrels a day of production. More than 25% of natural-gas production is also shut in, equal to 566.67 million cubic feet a day.
“That lack of production is going to lead to a dangerous situation where crude supplies and natural gas supplies are still going to be falling at a time when the demand is going to rise again this winter,” said Phil Flynn, senior market analyst at The Price Futures Group, in a daily report.
Also on Nymex Wednesday, October natural gas traded at $4.832 per million British thermal units, up 0.6%.
The EIA will release its report on U.S. natural-gas supplies on Thursday. On average, analysts forecast an increase of 70 billion cubic feet for the week ended Sept. 17, which would be less than the five-year average rise of 74 billion cubic feet, according to a survey conducted by S&P Global Platts.