Oil futures pulled back modestly Thursday, a day after Brent crude traded at its highest price since late July.
Analysts said underlying support remained tied to strong refinery demand and the slow restoration of offshore crude production in the Gulf of Mexico in the wake of Hurricane Ida, which made landfall on the Louisiana coast on Aug. 29.
West Texas Intermediate crude for November delivery, the U.S. benchmark, was down 37 cents, or 0.5%, at $71.86 a barrel on the New York Mercantile Exchange. November Brent crude, the global benchmark, fell 36 cents, or 0.5%, to $75.03 a barrel on ICE Futures Europe.
Oil jumped 2% Wednesday after the Energy Information Administration reported that U.S. crude inventories fell for a seventh straight week.
The drop took total U.S. crude oil inventories to just below 414 million barrels, the lowest since October 2018, noted Warren Patterson, head of commodities strategy at ING. And while U.S. output rose by 500,000 barrels a day over the week to 10.6 million barrels a day, it’s still well below the 11.5 million barrels a day seen before Hurricane Ida, he said, while data shows refiners continue to recover at a quicker pace than producers after the storm.
Crude was also lifted as equities and other assets perceived as risky were boosted on relief over the lack of any hawkish surprises from the Federal Reserve on Wednesday, as it signaled it could announce the scaling back of its monthly asset purchases as early as November, said Tom Essaye, founder of Sevens Report Research, in a note.
Worries around troubled property giant China Evergrande — which sank oil, equities and other assets perceived as risky on Monday — continued to fade after the People’s Bank of China made large liquidity injections into the financial system, helping ease fears of spillover effects from a possible default.
“Looking past the near-term noise of broad market volatility, the outlook for the
energy markets remains favorable as long as no new contagion fears like we saw with Evergrande trigger another wave of broad risk-off money flows, as demand is
seen steady amid an ongoing economic recovery while the supply outlook remains stable given a disciplined group of OPEC+ members,” Essaye wrote.